SOUTHERN  BRANCH, 

UNIVERSITY  OF  CALIFORNIA, 

LIBRARY, 

iLjOS  ANGELES,  CALIF. 


OUR  ECONOMIC 
AND  OTHER  PROBLEMS 

OTTO  H.  KAHN 


OUR    ECONOMIC 

AND    OTHER    PROBLEMS 

A  Financier*  s  Point  of  View 


BY 

OTTO   H.  KAHN 


NEW  S&WJr  YORK 
GEORGE    H.  DORAN  COMPANY 


COPYRIGHT,   I920, 
BY   GEORGE    H.  DORAN    COMPANY 


PRINTED    IN   THE    UNITED    STATES    OF   AMERICA 


CONTENTS 

PART  ONE:    THE  LAST  FIGURE  OF  AN  EPOCH 

PAGE 

I     The  Last  Figure  of  an  Epoch     ....       13 
Edward  Henry  Harriman 

2     PART  TWO:    CONCERNING  BUSINESS  AND 
ECONOMICS 

II     Strangling  the  Railroads 67 

III  Government  Ownership  of  Railroads      .       95 

IV  Suggestions  Concerning    the    Railroad 

Problem 108 

V    High  Finance 119 

VI     The  New  York  Stock  Exchange  and  Public 

Opinion 144 

VII    Two  Years  of  Faulty  Taxation,  and  the 

Results 163 

v,  VIII    The  Need  for  National  Efficiency   .      .  214 

*      IX    The  Menace  of  Paternalism     ....  235 

X    The  Task  Ahead 276 

XI     Roosevelt  and  Business 317 

PART  THREE:    CONCERNING  WAR  AND 
FOREIGN  RELATIONS 

XII     France 323 

XIII  When  the  Tide  Turned 326 

XIV  Great  Britain .342 

v 


VI  CONTENTS 

PAGE 

XV    An  Open  Letter 346 

XVI     A  Golden  Book  of  Soldiers'  Letters      .  351 

XVII     America  and  the  League  of  Nations     .     .  354 

XVIII     A  Letter  to  an  Englishman      ....  368 

PART  FOUR:   CONCERNING  ART 

XIX     Some  Observations  on  Art  in  America  .      .  379 

XX    An  Experiment  in  Popular  Priced  Opera  .  393 

XXI    Art  and  the  People 406 


PART  ONE:    THE  LAST  FIGURE  OF 
AN  EPOCH 


"His  death  coincided  with  what  appears  to  be  the  ending 
of  an  epoch  in  our  economic  development.  His  career  was  the 
embodiment  of  unfettered  individualism.  For  better  or  for 
worse — personally  I  believe  for  better  unless  we  go  too  far  and 
too  fast — the  people  appear  determined  to  put  limits  and  re- 
straints upon  the  exercise  of  economic  power  just  as  in  former 
days  they  put  limits  and  restraints  upon  the  absolutism  of 
rulers.  Therefore,  I  believe  there  will  be  no  successor  to  Mr. 
Harriman;  there  will  be  no  other  career  like  his."  {January, 
1911.) 


THE  LAST  FIGURE  OF  AN  EPOCH 


EDWARD    HENRY    HARRIMAN 


I 


FIRST  met  Mr.  Harriman  in  the  year  1894.  At 
that  time  what  moderate  degree  of  importance  at- 
tached to  his  person  in  the  financial  community  rested 
mainly  upon  the  fact  that  he  was  chairman  of  the 
finance  committee  of  the  Illinois  Central  Railroad.  It 
was  then  a  well  known  circumstance  among  bankers 
that  the  Illinois  Central's  finances  were  managed  with 
remarkable  skill  and  foresight.  Somehow  or  other,  it 
never  had  bonds  for  sale  except  in  times  when  bonds 
were  in  great  demand ;  it  never  borrowed  money  except 
when  money  was  cheap  and  abundant;  periods  of  storm 
and  stress  ever  found  it  amply  prepared  and  fortified ; 
its  credit  was  of  the  highest. 

The  few  acquainted  with  the  facts  conceded  that 
Mr.  Harriman  was  a  shrewd  financial  manager,  but  he 
had  reached  the  age  of  nearly  fifty  years  without  at- 
tracting any  general  attention.  In  later  life,  when  in 
reminiscent  mood,  he  used  to  say  that  the  fact  that  he 
had  been  born  and  bred  in  New  York,  and  had  done 
his  work  right  here  in  the  midst  of  people,  many  of 

An  address  delivered  before  the  Finance  Forum,  New  York,  Janu- 
ary 25,  1911. 

13 


14       THE      LAST       FIGURE      OF      AN       EPOCH 

whom  had  known  him  a  great  number  of  years,  had 
militated  considerably  against  his  recognition.  He 
thought  if  he  had  "blown"  into  New  York  from  the 
West,  his  rise  would  have  been  a  good  deal  more  rapid. 

It  was  the  old  story  of  the  prophet  having  little 
honor  in  his  own  country.  Even  after  he  had  started  on 
his  course  of  achievements  in  the  Union  Pacific  Rail- 
road those  of  us  who  then  began  to  speak  about  the 
man's  marvellous  capacities,  used  to  be  met  frequently 
with  remarks  such  as : 

"Ned  Harriman !  Why,  I  knew  him  years  ago  as  a 
little  'two  dollar  broker.'  What  should  he  know  about 
practical  railroading4?  How  could  he  suddenly  be  de- 
veloping these  wonderful  qualities  you  speak  of  *?  You 
can't  make  me  believe  that  a  man  can  have  lived  in  this 
community  for  nearly  fifty  years,  have  been  known  to 
lots  of  people,  have  made  a  fairly  successful  career,  and 
then  all  of  a  sudden  turn  out  to  be  a  genius." 

My  first  vivid  impression  of  Mr.  Harriman  dates 
back  to  a  hot  summer  afternoon  in  1897,  when,  looking 
pale,  weary  and  tired  out,  he  came  to  my  firm's  office 
to  induce  us  to  take  an  interest  with  him  in  a  certain 
business.  We  did  not  particularly  care  for  it,  and  told 
him  that  we  preferred  not  to  join  in  the  transaction. 
He  argued  to  convince  us  of  its  merits,  and,  finally,  not 
having  made  any  headway,  he  desisted.  I  thought  he 
had  accepted  our  refusal.  He  got  up  to  go,  but  turned 
around  at  the  door  and  said : 

"I  am  dead  tired  this  afternoon,  and  no  good  any 
more.  I  have  been  on  this  job  uninterruptedly  all  day, 
taking  no  time  even  for  luncheon.    I'll  tackle  you  again 


EDWARD      HENRY      HARRIMAN  1  5 

to-morrow,  when  I  am  fresh.  I'm  bound  to  convince 
you  and  to  get  you  to  come  along." 

He  did.  He  came  again  the  next  day,  and  finally 
we  yielded  to  the  sheer  persistency  of  the  man,  and  to 
the  lucidity  of  his  arguments.  It  is  worth  mentioning, 
by  the  way,  that  his  judgment  was  right;  the  business 
turned  out  very  well. 

The  incident  has  impressed  itself  upon  my  mind  be- 
cause though  of  small  importance  in  itself,  it  was  so 
characteristic  of  the  man.  There  was  first  of  all  the 
correct  judgment  as  to  the  merits  of  a  proposition  and 
as  to  its  outcome — a  judgment  marvellously  clear  and 
sure,  almost  infallible.  There  was,  secondly,  the  iron 
determination — so  conspicuously  in  contrast  to  his  frail 
appearance — the  dogged  persistency  in  pursuing  and 
carrying  out  his  purpose. 

He  did  not  know  the  meaning  of  the  word  "defeat." 
He  never  "threw  up  the  sponge."  His  power  of  will 
was  nothing  short  of  phenomenal ;  and  by  its  exercise, 
coupled  with  his  indomitable  pluck  and  amazing  brain 
faculties,  I  have  seen  him  perform  veritable  miracles  in 
the  way  of  making  people  do  as  he  wanted.  One  in- 
stance as  an  illustration;  and  please  bear  in  mind  that 
the  incident  which  I  am  about  to  relate  occurred  at  a 
time  when  Mr.  Harriman  was  but  at  the  threshold  of 
his  successes,  and  had  not  yet  acquired  the  commanding 
prestige  which  came  to  him  in  later  years,  and  which, 
when  once  attached  to  a  man's  name  and  personality, 
naturally  adds  very  greatly  to  his  influence  over  other 
people. 

In  1898  (or  it  may  have  been  early  in  1899)  he  had 


l6       THE      LAST      FIGURE      OF     AN      EPOCH 

been  invited  to  take  an  interest  in  a  certain  property, 
and  though  not  greatly  caring  for  the  proposition,  had 
accepted.  A  few  months  afterward  the  people  who  had 
sought  Mr.  Harriman's  co-operation  suddenly  sold  out 
their  holdings  in  the  property  to  a  group  of  men  who 
thereupon  proceeded  to  assume  the  control  now  right- 
fully theirs,  and  to  substitute  themselves  and  their  ap- 
pointees in  place  of  Mr.  Harriman  and  his  colleagues. 

Having,  myself,  a  somewhat  indirect  interest  in  the 
situation,  I  had  occasion  to  discuss  it  with  him,  and  re- 
ferred to  the  cessation  of  his  short-lived  connection 
with  the  property,  which  I  took  as  a  matter  of  course. 
To  my  surprise,  he  interrupted  me:  "Hold  on!  Not 
so  fast!  I  am  not  through  with  this  thing  yet,  by 
any  means.  I  can't  be  played  fast  and  loose  with 
like  this.  I  did  not  care  particularly  to  go  into  it, 
as  you  know ;  but,  having  been  urged  to  do  so  and  hav- 
ing done  so,  I  am  in  it  to  stay."  "Of  course,  you  have 
a  just  grievance  against  the  men  who  have  quit,"  I 
replied.  "Having  asked  you  of  their  own  initiative  to 
co-operate  with  them,  it  was  a  mean  and  improper  act 
on  their  part  to  sell  out  without  first  conferring  and 
consulting  with  you.  But  it's  done,  the  newcomers 
are  in  rightful  control,  it's  no  use  making  a  fuss,  and  it 
seems  to  me  that  the  best,  and  indeed  the  only  thing 
for  you  to  do  is  to  look  pleasant  and  get  out.  As  a 
matter  of  fact,  why  should  you  care?  That  property 
is  of  very  little  interest  to  you." 

He  reiterated  his  view,  and  his  determination  not  to 
give  in.  "Well,"  I  said,  "what  are  you  going  to  do 
about  it?     They  have  the  right  to  turn  you  out  with- 


EDWARD     HENRY     HARRIMAN  17 

out  ceremony,  if  you  do  not  give  way  gracefully."  "I 
don't  know  yet,"  he  answered.  "I'll  just  stand  pat 
and  not  budge,  and  watch." 

After  a  while  the  newcomers  found  out  that,  while 
all  the  others  concerned  accepted  the  situation,  Mr. 
Harriman  would  not  quit  without  a  fight.  Though 
they  were  clearly  in  a  position  to  win,  as  far  as  their 
immediate  object  was  concerned,  they  hesitated  to 
attack  so  determined  an  opponent. 

Things  went  on  like  this  for  several  months,  Mr. 
Harriman  retaining  an  attitude  of  quiet  but  uncom- 
promising defiance.  The  newcomers  somehow  or  other 
began  to  feel  uncomfortable.  Here  was  a  man  who 
was  beaten,  yet  did  not  know  it,  did  not  get  out  of  the 
way  of  a  steam  roller,  as  he  obviously  ought  to  have 
done,  according  to  all  the  rules  of  self-preservation; 
and  who  now  and  then,  metaphorically  speaking,  made 
a  significant  movement  toward  his  hip  pocket.  His 
attitude  disturbed  them.     They  could  not  make  it  out. 

It  was  contrary  to  all  logic,  experience  and  usage 
that  a  man  should  flatly  and  obstinately  decline  to  step 
out  when  they  had  the  actual  power  by  the  simple 
process  of  casting  their  votes  to  throw  him  out.  What 
did  it  all  mean1?  Was  there  any  weak  point  in  their 
position,  which  they  had  overlooked*?  They  had  the 
votes,  a  clear  majority;  yet  Harriman  must  have  some 
good  counter-move  up  his  sleeve,  something  which  gave 
him  that  calm  confidence  to  stand  up  and  jauntily 
invite  a  fight. 

A  bluff,  perhaps"?  They  were  pretty  good  at  that 
game  themselves,  but  they  argued  that  manifestly  it 


l8       THE      LAST      FIGURE      OF     AN      EPOCH 

would  have  been  too  easy  to  call  that  hand  to  warrant 
reliance  on  the  diagnosis  of  a  mere  bluff.  Moreover 
their  guess  was  not  so  very  far  from  right.  There 
were,  it  is  true,  some  of  the  ingredients  of  bluffing  in 
his  attitude,  but.  if  it  had  come  to  a  fight,  Mr.  Harri- 
man  would  have  given  them  a  pretty  lively  tussle, 
even  though  ultimately,  if  they  saw  it  through,  they 
were  bound  to  win.  Mr.  Harriman  was  not  averse 
to  something  resembling  bluffing,  in  fact  he  rather  en- 
joyed the  sport;  but  he  never  indulged  in  that  pastime 
without  having  previously  been  careful  to  put  himself 
in  such  a  position  that,  if  a  test  of  strength  was  called 
for,  he  could,  if  not  win,  at  least  give  such  an  account 
of  himself  that  his  opponent  would  become  imbued 
with  a  wholesome  respect  for  his  fighting  capacity, 
and  would  be  extremely  disinclined  to  tackle  so  for- 
midable and  resourceful  an  antagonist  in  the  future. 

However,  in  this  instance  no  fight  occurred.  The 
hostile  armies  kept  confronting  each  other — Mr.  Harri- 
man immovable  and  inscrutable;  the  enemy  hesitant 
and  rather  troubled.  One  morning  he  called  me  on 
the  telephone  to  ask  me  to  accompany  him  to  a  con- 
ference at  the  enemy's  headquarters.  I  went,  some- 
what in  the  capacity  of  second  at  a  duel.  He  gave  me 
no  indication  as  to  what  the  proceedings  were  to  be. 

The  conference  lasted  three  hours.  Most  of  the 
talking  was  done  by  the  other  side.  Mr.  Harriman 
did  not  threaten  or  cajole  or  make  promises.  He  sim- 
ply brought  to  bear,  upon  these  men,  the  stupendous 
force  of  his  will  and  personality.  When  the  confer- 
ence broke   up,   not   only  was   there  no  longer  any 


EDWARD      HENRY      HARRIMAN  19 

question  of  his  retiring,  but  the  newcomers  had  agreed 
to  turn  over  to  him  their  votes  and  proxies,  and  to  let 
him  run  the  property. 

The  object  in  itself  was  by  no  means  great  or  impor- 
tant or  essential  to  Mr.  Harriman's  plans.  It  became 
important  to  him  when  he  found  that  its  attainment 
was  difficult,  when  he  found  himself  confronted  with 
obstacles  and  opposition.  He  positively  loved  obsta- 
cles, and  the  harder  to  surmount,  the  more  they  allured 
him.  Difficulties,  risks,  dangers  were  not  only  no  de- 
terrents, but  rather  inducements  to  undertake  a  task. 

When  there  was  an  easy  way  to  accomplish  a  thing, 
and  also  a  difficult  way,  Mr.  Harriman's  inclination 
would  be  to  take  the  latter.  I  once  told  him  I  sus- 
pected him  of  purposely  creating  difficulties  and  ob- 
stacles for  himself  for  the  mere  sport  of  overcoming 
them,  as  a  keen  horseman  will  go  out  of  his  way  to 
jump  hurdles  and  fences,  as  a  mountain-climber  will 
test  his  skill  and  daring  by  deliberately  choosing  a 
difficult  and  dangerous  ascent. 

II 

The  particular  incident  which  I  have  related,  espe- 
cially impressed  itself  upon  my  mind  in  all  its  details, 
because  it  was  the  first  time  I  had  seen  Mr.  Harriman 
in  action.  I  witnessed  many  similar  cases  in  the  fur- 
ther course  of  his  career,  during  which  it  was  my  privi- 
lege to  be  closely  affiliated  with  him.  Over  and  over 
again  did  I  observe  him  bending  men  and  events  to  his 
determination,  by  the  exercise  of  the  truly  wonderful 


20      THE      LAST      FIGURE      OF     AN      EPOCH 

powers  of  his  brain  and  will;  powers  which  accom- 
plished their  fullest  potentialities  because  they  were 
united  with  unwavering  loyalty  under  all  circumstances 
and  with  a  sacred  respect  for  any  commitment  entered 
into.  A  moral  obligation,  to  him,  had  the  same  force 
and  meaning  as  a  legal  contract. 

Not  infrequently  he  would  come  to  meetings  at 
which  ten  or  twelve  men  sat  around  the  table  with 
him, — men,  too,  of  no  mean  standing  in  the  business 
community, — a  large  majority  of  whom  were  opposed 
to  the  measures  he  would  propose.  Yet,  I  know  of 
hardly  an  instance  of  any  importance  where  his  views 
did  not  prevail  finally,  and,  what  is  more,  generally  by 
unanimous  vote.  If  he  did  not  succeed  in  what  he 
had  set  himself  to  achieve  at  the  first  attempt,  or  the 
second,  or  the  third  attempt,  he  would  retreat  for  a 
while,  but  he  never  gave  up;  he  moved  on  toward  the 
attainment  of  his  object,  undismayed,  resourceful,  re- 
lentless as  fate,  with  that  supreme  patience  which,  ac- 
cording to  Disraeli,  is  "a  necessary  ingredient  of 
genius." 

When  Mr.  Ryan  bought  the  control  of  the  Equitable 
Life  Assurance  Society,  Mr.  Harriman  claimed  to 
share  in  the  purchase.  Mr.  Ryan  refused  positively 
and  publicly.  For  five  years  nothing  more  was  heard 
of  the  matter,  and  even  Mr.  Harriman's  intimate  asso- 
ciates thought  he  had  dropped  the  idea.  Only  a  short 
while  ago  it  became  known  that  a  year  before  his  death 
Mr.  Harriman  had  finally  succeeded  in  his  object, 
having  purchased  from  Mr.  Ryan  one-half  of  his  hold- 
ings at  their  original  cost. 


EDWARD     HENRY      HARRIMAN  21 

A  high  placed  personage  temporarily  residing  in 
Japan  during  the  year  1905  told  me  that  the  most 
amazing  thing  he  had  ever  witnessed  was  the  way  in 
which  Mr.  Harriman  in  the  course  of  a  ten  days'  visit 
to  Tokio  made  a  whirlwind  campaign  among  the  lead- 
ing men  and  succeeded  in  carrying  away  from  the  wily, 
wary,  slow-moving  Orientals  a  most  important  con- 
tract— so  important  and  so  far-reaching  that,  had  it 
been  carried  out  (and  it  was  no  fault  of  Mr.  Harri- 
man's  that  it  was  not),  the  course  of  Far  Eastern 
diplomacy  in  recent  years  would  have  been  different  in 
some  essential  aspects. 

I  was  asked  sometimes,  when  things  that  had  seemed 
utterly  improbable  of  realization  were  finally  accom- 
plished by  Mr.  Harriman,  to  give  a  reason  why  the 
parties  concerned  had  yielded  to  him.  What  was  the 
inducement?  What  the  motive  of  their  action? 
Why  had  they  done  finally  what  they  had  declared 
they  would  not  do,  or  what  there  was  no  plausible  ex- 
planation for  their  doing?  My  answer  was:  "Simply 
because  Mr.  Harriman  had  set  his  will  and  mind  to 
work  to  make  them  do  it." 

He  once  said  to  me,  early  in  our  acquaintance:  "All 
the  opportunity  I  ask  is  to  be  one  among  fifteen  men 
around  a  table." 

Yet  he  had  neither  eloquence  nor  what  is  ordinarily 
called  tact  or  magnetism.  His  were  not  the  ways  or 
the  gifts  of  the  "easy  boss."  Smooth  diplomacy,  the 
talent  of  leading  men  almost  without  their  knowing 
that  they  are  being  led,  skillful  achievement  by  win- 
ning compromise  were  not  his  methods.     His  genius 


22      THE      LAST      FIGURE      OF     AN      EPOCH 

was  the  genius  of  the  conqueror,  his  dominion  was 
based  on  rugged  strength,  iron  will,  irresistible  deter- 
mination, indomitable  courage,  tireless  toil,  amazing 
intellect  and,  last  but  not  least,  upon  those  qualities 
of  character  which  command  men's  trust  and  confi- 
dence. He  was  constitutionally  unable  either  to  ca- 
jole or  to  dissemble.  He  was  stiff  necked  to  a  fault. 
It  would  have  saved  him  much  opposition,  many  ene- 
mies, many  misundertandings,  if  he  had  possessed  the 
gift  of  suavity,  of  placing  a  veneer  over  his  domineer- 
ing traits,  so  as  to  make  the  fact  of  his  chieftainship 
less  overt,  and  thereby  less  irksome.  Sometimes,  when 
even  some  of  his  close  associates  would  chafe  under 
his  undisguised  authoritativeness,  I  ventured  to  plead 
with  him  that  the  results  he  sought  could  just  as  surely 
be  obtained  by  less  combative,  more  gentle  methods, 
while  at  the  same  time  avoiding  bad  blood  and  ill 
feeling.     Invariably  his  answer  was : 

"You  may  be  right  that  these  things  could  be  so 
accomplished,  but  not  by  me.  I  can  work  only  in  my 
own  way.  I  cannot  make  myself  different,  nor  act  in 
a  way  foreign  to  me.  They  will  have  to  take  me  as  I 
am,  or  drop  me.  This  is  not  arrogance  on  my  part.  I 
simply  cannot  achieve  anything  if  I  try  to  compromise 
with  my  nature  and  to  follow  the  notions  of  others." 

Ill 

To  a  man  thus  constituted,  the  world  did  not  yield 
its  rewards  easily  and  willingly.  The  way  to  the 
heights  of  power  leads  always  through  the  valleys  of 


EDWARD     HENRY     HARRIMAN  23 

envy,  jealousy  and  animosity;  but  in  Mr.  Harriman's 
case  the  opposition,  the  enmities,  the  hatreds,  which 
disputed  and  contested  his  progress  were  bitter,  violent 
and  numerous,  far  beyond  ordinary  measure.  Yet,  by 
the  irresistible  force  of  his  genius,  he  acquired  in  the 
space  of  but  ten  years  a  position  in  the  railroad  world 
such  as  no  man  had  held  before  him,  and  no  man,  I 
believe,  will  hold  again. , 

Though  he  was  lacking  in  the  faculty  of  attracting 
men  in  general  (I  say  "in  general,"  because  upon  those 
who  came  close  to  him  the  spell  of  his  personality  was 
most  potent),  he  did  have  the  gift  in  a  most  marvellous 
degree  of  attracting  power  as  the  magnet  attracts  iron. 
At  the  time  of  his  death,  the  papers  were  full  of  com- 
ments as  to  the  vastness  of  the  territory  in  which  his 
influence  was  potent  or  controlling;  but  the  most  re- 
markable thing,  to  my  mind,  was  not  the  extent  of 
his  power,  but  the  fact  that  his  commanding  position, 
his  control  over  so  many  undertakings,  rested  not  on 
money,  but  on  personality. 

I  do  not  think  that  the  greater  part  of  his  fortune 
was  invested  in  railroad  stocks,  and,  if  every  cent  of  it 
had  been  so  invested,  it  would  have  amounted  to  but 
a  small  fraction  of  the  share  capital  of  the  properties 
in  which  his  influence  was  predominant.  He  became 
gradually  the  centre  of  railroad  power,  and  at  the  same 
time  one  of  the  greatest  powers  in  finance,  because  his 
masterful  ability,  his  constructive  genius,  the  farsight- 
edness and  correctness  of  his  vision,  his  faithfulness  to 
trust  reposed  in  him,  impressed  themselves  finally 
upon  friend  and  foe  alike. 


24      THE      LAST      FIGURE      OF     AN      EPOCH 

He  had  measured  strength  with  all  those  who  cared 
to  cross  swords  with  him,  and  out  of  every  fight  he  had 
come,  if  not  invariably  victorious,  invariably  un- 
scathed, bigger  and  stronger  than  before.  The  rail- 
road properties  in  his  charge  had  grown  and  prospered 
beyond  all  others.  There  were  enemies  left,  but  none 
that  cared  any  longer  to  try  conclusions  with  him. 
Not  a  few,  even,  of  those  formerly  hostile,  and  many 
of  those  formerly  indifferent,  aloof  or  suspicious,  felt 
at  last  compelled  to  acknowledge  the  genius  of  the 
man,  and  to  pay  him  the  tribute  of  seeking  his  co- 
operation. 

During  the  last  year  of  his  life,  his  office,  or  more 
correctly  his  library,  uptown  (for  at  that  period  he 
did  not  usually  go  downtown  oftener  than  once  or 
twice  a  week)  resembled  the  office  of  a  famous  physi- 
cian during  consultation  hours.  Properties  in  feeble 
health  were  brought  to  him  by  anxious  parents  for  pre- 
scriptions and  treatment.  Intricate  corporation  prob- 
lems were  submitted  to  him  for  diagnosis.  Some  enter- 
prises that  he  had  treated  and  restored  to  good  health 
presented  themselves  for  inspection,  having  learned 
the  wisdom  of  remaining  under  his  care.  Even  big, 
strapping  concerns  apparently  in  perfect  health,  would 
drop  in  and  have  themselves  looked  over,  as  a  precau- 
tionary measure,  and  take  advice  how  to  guard  against 
sickness  and  keep  in  good  trim. 

As  his  fame  increased,  owing  to  some  particularly 
brilliant  cure  or  the  patronage  of  some  especially  im- 
portant patient,  the  number  of  those  that  flocked  to 
his  consultation  rooms  became  greater  and  greater — ■ 


EDWARD     HENRY     HARRIMAN  2$ 

so  much  so  that,  to  my  personal  knowledge,  many  had 
to  be  turned  away,  simply  because  the  famous  physi- 
cian could  not  possibly  find  time  to  attend  to  them. 

This  was  Mr.  Harriman's  situation  from  the  spring 
of  1908  to  the  time  of  his  lamented,  untimely  death  in 
September,  1909,  less  than  twelve  years  after  his  great 
opportunity  had  come  to  him  in  his  election  to  the 
Board  of  the  Union  Pacific  Railroad. 

Contrary  to  the  general  impression,  he  had  had  noth- 
ing to  do  with  the  financial  reorganization  of  that 
property  consummated  in  1897.  That  measure — after 
years  of  receivership  during  which  the  system  had  be- 
come dismembered  through  the  secession  of  its  most 
important  branches,  feeders  and  outlets  until  nothing 
was  left  of  the  old  Union  Pacific  System  but  the  bare 
trunk  stem,  after  infinite  delays,  complications  and 
difficulties — was  finally  accomplished  by  a  Committee 
consisting  of  Messrs.  Louis  Fitzgerald,  Jacob  H. 
Schiff,  T.  Jefferson  Coolidge,  Jr.,  Chauncey  M.  De- 
pew,  Marvin  Hughitt  and  Oliver  Ames,  with  Mr. 
Winslow  S.  Pierce  as  counsel,  and  Messrs.  Kuhn,  Loeb 
&  Company  as  financial  managers.  After  the  property 
had  been  acquired  by  the  Reorganization  Committee 
at  foreclosure  sale,  Mr.  Harriman  was  elected  a  mem- 
ber of  the  First  Board  of  Directors  in  December,  1897, 
in  compliance  with  a  promise  which  Mr.  Jacob  H. 
Schiff  had  made  to  him  in  the  course  of  the  reorganiza- 
tion proceedings. 

Almost  all  the  members  of  the  Board  had  been  pre- 
viously connected  with  the  Union  Pacific,  either 
through  old  affiliations  or  through  membership  in  the 


26      THE      LAST      FIGURE      OF     AN      EPOCH 

Reorganization  Committee.  Mr.  Harriman  was  a 
newcomer,  and  by  several  members  of  the  Board  his 
advent  was  not  regarded  with  friendly  eyes.  He  was 
looked  at  askance,  somewhat  in  the  light  of  an  intruder. 
His  ways  and  manners  jarred  upon  several  of  his  new 
colleagues,  and  he  was  considered  by  some  as  not  quite 
belonging  in  their  class,  from  the  point  of  view  of 
business  position,  achievements  or  financial  standing, 
a  free  lance,  neither  a  railroad  man  nor  a  banker  nor 
a  merchant. 

Within  one  short  year  he  had  placed  himself  at  the 
head  of  the  board,  and  become  the  ruling  spirit,  the 
dominating  force  of  the  enterprise.  If  you  ask  me 
how  this  amazing  transformation  was  accomplished,  I 
can  only  refer  you  to  other  examples  which  history 
records  of  the  phenomenal  rise  of  those  exceptional 
beings  whom  Providence  has  endowed  with  such  quali- 
ties as  to  compel  the  acceptance  of  their  leadership  by 
their  contemporaries. 

IV 

The  story  of  the  rise  and  development  of  the  Union 
Pacific  under  Mr.  Harriman's  magic  guidance;  the 
metamorphosis  by  which  the  rather  pathetic  object 
which  emerged  from  the  receivership,  stripped  of  its 
outlets  and  most  important  branches,  ending  rather 
helplessly  at  the  borders  of  the  Great  Salt  Lake,  was 
turned  in  an  incredibly  short  time  into  the  magnificent 
system  of  today ;  the  startling,  almost  uncanny  rapidity 
with  which  Mr.  Harriman  assimilated  and  mastered  all 


EDWARD     HENRY     HARRIMAN  I'J 

the  intricate  details,  problems  and  difficulties  of  rail- 
roading, and  from  having  been  all  his  life  a  financial 
man  (except  for  a  very  short  term  as  vice-president  of 
the  Illinois  Central  in  Chicago)  became  an  acknowl- 
edged master  in  that  science;  the  boldness  and  accuracy 
of  his  conceptions  and  visions,  the  daring  of  his  strat- 
egy, the  dramatic  incidents  which  accompanied  his 
conquering  career — all  this  has  been  so  fully  and  fre- 
quently told  in  newspapers  and  magazines  that  I  need 
not  repeat  it  here. 

I  will  only  point  to  the  fact  that  in  the  first  fiscal 
year  following  Mr.  Harriman's  election  to  the  Union 
Pacific  board  the  surplus  earnings  of  the  system  ap- 
plicable to  $107,000,000  of  common  stock  were 
$5,800,000.  Today,  taking  the  figures  of  the  last 
fiscal  year,  the  surplus  earnings  of  the  Union  Pacific 
system  (excluding  the  Southern  Pacific),  applicable  to 
$216,000,000  of  common  stock,  are  $41,500,000. 
From  the  time  Mr.  Harriman  assumed  the  direction  of 
affairs  to  the  time  of  his  death  $127,000,000  were 
spent  in  improving  the  property,  for  three-quarters  of 
which  sum  (to  be  exact,  $94,000,000)  not  one  dollar 
of  capitalization  was  created.  The  free  assets  held 
absolutely  unincumbered  in  its  treasury  have  an  aggre- 
gate value  of  $210,000,000. 

It  is  essential  to  remember,  in  contemplating  these 
truly  astounding  results,  that  they  were  achieved,  not 
only  with  no  increased  burden  to  the  public,  but  on  the 
contrary  the  shippers  and  others  using  the  lines  of  the 
Union  Pacific  system  were  benefited  alike  with  the 
stockholders.     Indeed,  whenever  there  was  a  question 


28      THE      LAST      FIGURE      OF     AN      EPOCH 

between  increased  returns  to  the  stockholder  and  in- 
creased efficiency  to  the  Railroad,  Mr.  Harriman  in- 
variably chose  the  latter  course.  As  a  matter  of  fact, 
he  cared  altogether  more  for  the  approbation  of  the 
people  served  by  the  lines  of  his  railroads  than  for  the 
applause  of  the  financial  or  any  other  part  of  the  com- 
munity. 

I  have  sometimes  heard  it  said  that  the  remarkable 
accomplishments  indicated  by  the  figures  above  quoted 
were  due  mainly  to  the  unprecedented  growth  in 
wealth  and  prosperity  of  the  territory  served  by  the 
Union  Pacific  system,  and  not  to  the  genius  of  Mr. 
Harriman;  that  the  country  made  the  Union  Pacific 
and  would  have  made  the  Union  Pacific,  Harriman  or 
no  Harriman.  There  is  just  a  sufficient  modicum  of 
truth  in  this  assertion  to  deserve  contradiction. 

That  the  growth  and  prosperity  of  its  territory  were 
indispensable  to  the  growth  and  prosperity  of  the 
Union  Pacific  goes  without  saying;  but  this  growth 
and  prosperity  during  the  past  decade  were  universal 
throughout  the  country  west  of  the  Missouri  River, 
and  their  benefits  were  available  to  all  other  Western 
railroads  to  the  same  extent  as  to  the  Union  Pacific. 
Yet,  there  is  not  a  single  line  that  comes  close  to 
equaling  the  record  made  by  the  Union  Pacific,  and  it 
is  the  uniqueness  of  the  Union  Pacific's  attainments, 
considering  not  only  the  financial  results  to  the  stock- 
holders, but  also  the  standard  of  efficiency,  service  to 
the  public,  physical  condition,  financial  strength  and 
resources,  which  measures  the  uniqueness  of  Mr.  Harri- 
man's  genius. 


EDWARD     HENRY     HARRIMAN  29 

I  will  cite  a  characteristic  instance  of  how  he  began 
his  campaign  of  efficiency: 

Immediately  after  he  had  succeeded  in  having  him- 
self elected  chairman  of  the  executive  committee,  in 
1898,  and  while  the  superior  office  of  chairman  of 
the  board  (later  on  occupied  by  him)  was  still  held  by 
another  (Mr.  Winslow  S.  Pierce),  he  started  on  a  tour 
of  inspection  of  the  property,  going  over  every  mile  of 
the  line,  taking  the  measure  of  the  officials  in  charge, 
interviewing  shippers,  establishing  his  authority  with 
the  surprised  and  somewhat  reluctant  personnel  of  the 
organization  in  the  West,  who  had  hardly  heard  his 
name  before,  and  did  not  quite  know  what  to  make  of, 
and  how  to  act  toward  the  nervous,  rapid-fire,  little 
man  who  came  blown  in  like  a  whirlwind,  sweeping 
fresh  currents  of  air  into  all  sorts  of  dusty  nooks  and 
corners. 

After  a  few  weeks  he  telegraphed  to  the  Board  of 
Directors  in  New  York  asking  for  authority  to  pur- 
chase immediately  a  large  quantity  of  cars,  locomo- 
tives, rails,  etc.,  and  to  start  various  works  of  improve- 
ment, the  total  aggregating,  as  I  remember,  something 
like  $25,000,000.  The  telegram  was  followed  by  a 
written  communication  setting  forth  the  reasons  for 
his  requests  and  the  main  details  of  the  proposed  ex- 
penditure. 

The  reasons,  in  short,  were  that  he  clearly  discovered 
signs  of  returning  prosperity  after  the  long  period  of 
depression,  that  he  believed  this  prosperity  would  as- 
sume proportions  corresponding  to  the  depth  and  ex- 
tent of  the  long  drawn  out  and  drastic  reaction  which 


30      THE      LAST      FIGURE      OF     AN      EPOCH 

preceded  it,  that  labor  and  materials  were  then  exceed- 
ingly cheap,  but  would  begin  to  advance  before  very 
long,  that  the  Union  Pacific  should  put  itself  in  shape 
to  take  care  of  the  largely  increased  traffic  which  he 
foresaw,  and  to  attract  business  to  its  lines  by  being 
better  prepared  for  it  and  thus  affording  shippers  better 
facilities  than  its  neighbors.  At  that  time  the  Union 
Pacific  had  just  emerged  from  receivership.  During 
the  years  of  the  receivership  all  of  its  surplus  earnings 
had  been  spent  on  increasing  its  rolling  stock,  improv- 
ing its  physical  condition,  etc.,  so  that  it  was  supposed 
to  be  amply  supplied  with  facilities  to  handle  its  then 
existing  volume  of  traffic.  And  $25,000,000  in  those 
days  was  a  vastly  greater  sum  than  nowadays,  when 
the  stupendous  development  of  the  country  has  made 
railroad  expenditures  of  proportionate  size  familiar. 
It  seemed  a  pretty  hazardous  thing  to  venture  upon 
this  huge  outlay  simply  on  a  guess  of  coming  unprece- 
dented prosperity. 

There  was  much  doubt  in  the  board  as  to  whether 
Mr.  Harriman's  recommendation  should  be  followed. 
I  remember  that  the  statement  was  made  that  if  it  were 
followed  the  Union  Pacific  would  find  itself  in  re- 
ceiver's hands  again  before  two  years  had  passed.  The 
decision  was  reached  finally  to  take  no  action  of  either 
approval  or  disapproval,  but  to  let  the  matter  stand 
over  until  Mr.  Harriman's  return  to  New  York.  He 
came  home,  and  after  long  and  strenuous  argument  he 
carried  the  day.  The  appropriation  for  the  expendi- 
tures advocated  by  him  was  made,  though  with  con- 
siderable headshaking  and  misgiving.     Events  there- 


EDWARD     HENRY      HARRIMAN  31 

after  proved  that  it  was  this  courageous  outlay  at  a 
time  when  the  dawn  of  the  unexampled  prosperity 
which  was  to  come  was  barely  discernible,  and  the 
intelligent  and  efficient  application  of  these  funds,  that 
started  the  new  Union  Pacific  on  its  amazingly  suc- 
cessful career  and  placed  it,  with  one  bound,  in  the 
forefront  among  western  railroads. 

Incidentally,  I  may  mention,  as  characteristic  of  the 
man,  that  Mr.  Harriman  felt  so  certain  of  the  cor- 
rectness of  his  judgment,  and  of  his  ability  to  carry 
the  board  with  him  (though  he  had  no  illusions  as  to 
the  sentiment  of  some  of  its  members  regarding  him 
and  of  the  fatal  consequences  to  his  career  in  case  his 
forecast  should  turn  out  to  have  been  mistaken  or  even 
premature)  that,  in  order  not  to  lose  time  and  oppor- 
tunity while  he  was  still  in  the  West,  he  took  upon 
himself  the  responsibility,  at  his  personal  risk,  of  con- 
cluding various  contracts  for  purchases  and  work  in- 
cluded in  the  program  advocated  by  him. 

Some  months  before,  he  had  caused,  his  associates  to 
wonder  and  doubt,  by  buying  all  of  the  Union  Pacific 
common  stock  he  could  accumulate,  up  to  the  price  of 
25  or  thereabouts.  He  must  have  acquired  many 
thousands  of  shares,  for  the  stock  had  long  been  selling 
freely  between  15  and  20.  It  was  considered  to  have 
very  little  intrinsic  value,  and  no  dividends  were  in 
sight  even  for  the  preferred,  much  less  for  the  common 
stock.  I  recollect  an  influential  financial  personage 
saying  to  me  about  these  purchases,  which  at  the  time 
attracted  a  good  deal  of  comment :  "You  see,  the  man 
is   essentially   a   reckless   speculator.     He   is   putting 


32       THE      LAST      FIGURE      OF      AN      EPOCH 

everything  he  has  and  more  into  Union  Pacific  stock 
at  these  prices.     He  will  come  to  grief  yet." 

When  I  referred  to  the  subject  of  these  purchases 
in  conversation  with  Mr.  Harriman,  he  said  calmly: 
"Union  Pacific  common  is  intrinsically  worth  as  much 
as  St.  Paul  stock.  With  good  management  it  will  get 
there." 

It  seemed  pretty  wild  talk,  and  even  though  at  that 
time  already  I  had  conceived  great  admiration  for  him 
and  great  faith  in  him,  I  did  not  take  it  very  seriously. 
Union  Pacific,  just  emerged  from  wreck  and  ruin:  St. 
Paul,  an  old  seasoned  dividend  payer  that  had  passed 
with  ease  through  the  panics  and  devastations  of  the 
preceding  years,  and  was  even  then  selling  above  par ! 
But  within  less  than  ten  years  from  the  time  Mr.  Har- 
riman had  made  what  then  appeared  a  preposterous 
prediction,  Union  Pacific  had  been  placed  upon  an 
annual  dividend  basis  of  10%,  was  selling  in  the  mar- 
ket at  close  to  200,  and  had  left  the  price  of  St.  Paul 
far  behind. 

Those  who  are  familiar  with  Wall  Street  events  will 
know  that  in  August,  1906,  the  Union  Pacific  dividend 
was  jumped  from  an  annual  rate  of  6%  to  10%.  This 
act  unchained  a  storm  of  criticism  against  Mr.  Harri- 
man. He  was  accused  of  having  perpetrated  a  stock 
jobbing  trick — as  the  property,  it  was  thought,  could 
not  possibly  maintain  that  rate  of  dividend,  and  of 
having  bought  stock  on  his  advance  knowledge,  imme- 
diately preceding  the  declaration  of  the  increased 
dividend — so  as  to  profit  from  the  rise  in  the  market 
which  was  bound  to  follow,  at  the  expense  of  other 


EDWARD     HENRY     HARRIMAN  33 

holders  who  had  no  knowledge  of  what  was  contem- 
plated. 

Both  accusations  were  unjustified.  No  property  for 
the  management  of  which  Mr.  Harriman  was  respon- 
sible ever  reduced  its  dividend,  and  the  Union  Pacific 
Railroad  has  maintained  with  ease  a  distribution  of 
10%  per  annum,  derived  to  the  extent  of  6%  from  the 
earnings  of  the  railroad,  and  to  the  extent  of  4%  from 
its  investment  holdings. 


Anybody  who  knew  anything  of  Mr.  Harriman's 
methods  knew  that  his  acts  were  not  the  results  of  sud- 
den impulse,  but  of  plans  long  prepared  and  deter- 
mined on;  that  he  had  gone  on  record  at  every  oppor- 
tunity as  advising  owners  of  Union  Pacific  stock  to 
retain  their  holdings,  and  that  if  he  wanted  to  increase 
his  own  holdings  he  would  do  so  (as,  in  fact,  he  in- 
variably did)  in  times  of  depression  and  not  wait  to 
rush  in  a  few  days  or  weeks  before  the  advent  of  some 
favorable  consummation. 

At  one  of  the  hearings,  in  the  course  of  which  he  was 
examined  later  on,  he  was  asked  whether  it  was  not 
a  fact  that  he  had  bought  Union  Pacific  stock  in  antici- 
pation of  the  10%  dividend  declaration,  the  meaning 
of  the  question  being  of  course  the  accusation  that  he 
had  unfairly  taken  advantage  of  his  advance  knowl- 
edge of  the  contemplated  increase.  To  everyone's 
surprise,  Mr.  Harriman  calmly  answered  "Yes."  The 
examiner  turned  toward  the  audience  with  a  trium- 


34      THE      LAST      FIGURE      OF     AN      EPOCH 

phant  smile  and  continued:  "Mr.  Harriman,  as  you 
have  been  thus  frank,  would  you  mind  telling  me  ap- 
proximately when  and  at  what  prices  you  bought  that 
stock  which  you  have  just  admitted  you  acquired  in 
anticipation  of  the  increased  dividend*?" 

Mr.  Harriman  smiled  faintly  in  his  turn  as  he  an- 
swered: "Certainly,  I  shall  be  glad  to  tell  you.  Let 
me  think  back  a  minute.  I  bought  most  of  that  stock, 
many  thousand  shares  of  it,  in  anticipation  of  the  10% 
dividend  declared  August,  igo6,  some  eight  years  be- 
fore, mainly  in  1898,  and  I  paid  all  the  way  from  20 
to  30  for  it.  And  I  bought  more  of  it  in  subsequent 
years,  whenever  prices  were  low,  many  thousand  shares 
more;  and  all  the  time  while  I  was  accumulating  it  I 
anticipated  the  declaration  of  that  dividend." 

In  telling  this  story,  I  do  not  wish  to  be*  understood 
as  endorsing  the  wisdom  and  propriety  of  the  increase 
of  the  Union  Pacific  dividend  from  6%  to  10%  at  one 
jump.  It  was  one  of  the  few  instances  in  which  I 
ventured  to  differ  from  Mr.  Harriman's  judgment. 
A  man  at  the  head  of  a  great  corporation,  must  not 
only  do  right,  but  he  must  be  very  careful  to  avoid  even 
appearances  tending  to  arouse  the  suspicion  of  his  not 
doing  right.  The  fact  and  manner  of  that  particular 
act  lent  themselves  to  sinister  interpretations,  unjusti- 
fied though  they  were.  But  regard  for  appearances 
was  not  one  of  Mr.  Harriman's  strong  points.  He 
had  little  patience  with  such  considerations,  and  de- 
clined to  recognize  their  importance.  While  he  was 
a  gentleman  by  birth  and  breeding,  by  instinct,  intent 


EDWARD     HENRY      HARRIMAN  35 

and  principles,  yet  he  rode  roughshod  over  convention- 
alities and  amenities. 

While  he  was  inwardly  a  man  of  genuine  kindliness, 
of  whom  many  a  generous  and  warmhearted  action 
might  be  related,  and  would  not  for  the  world  know- 
ingly have  hurt  any  one's  feelings,  he  had  an  extraor- 
dinary faculty  for  doing  that  very  thing,  for  rubbing 
people  the  wrong  way,  for  causing  himself  and  his 
actions  to  be  misunderstood  and  misjudged.  He  was 
a  master  of  what  Whistler  called  "the  gentle  art  of 
making  enemies."  His  manner  was  brusque;  he  was 
short  tempered,  though  he  had  his  temper  under  per- 
fect control,  and  never  lost  it  whatever  the  provoca- 
tion— in  fact  the  greater  the  strain  the  more  perfect  his 
calm  and  self-possession. 

He  had  infinite  patience  in  working  out  plans,  in 
biding  his  time,  but  very  little  in  intercourse  with  men. 
His  mind  worked  so  rapidly,  his  thoughts  crowded 
upon  him  at  such  a  rate,  that  his  words  could  not  come 
anywhere  near  keeping  pace  with  the  working  of  his 
brain.  The  consequence  was  that  in  discussions  he 
raced  for  the  points  he  wanted  to  make,  taking  short 
cuts  of  thought  and  expression,  expecting  the  bewil- 
dered listener  to  keep  up  with  the  chase,  with  the  result 
that  not  infrequently  he  was  but  half  understood,  or 
not  at  all  understood,  by  those  who  had  not,  through 
prolonged  association,  acquired  the  faculty  of  reading 
his  mental  shorthand.  He  desired,  like  every  nor- 
mally constituted  man,  to  possess  the  good  opinion  of 
his  fellow  men,  yet  he  had  not  only  a  strange  inepti- 
tude for  getting  on  friendly  terms  with  public  opinion, 


36      THE      LAST      FIGURE      OF     AN      EPOCH 

but  on  the  contrary  a  veritable  genius  for  what  is  com- 
monly called  getting  himself  into  hot  water,  and  of  lay- 
ing his  motives  and  his  acts  open  to  misconstruction. 

This  was  due  in  the  first  place  to  a  highly  honorable 
trait  in  his  character:  he  utterly  despised  and  abhorred 
hypocrisy  and  opportunism,  he  resolutely  declined  to 
stoop  to  any  artifices  to  curry  favor,  in  fact  leaned  over 
backward  in  his  dislike  of  all  methods  of  self-adver- 
tising. Conscious  of  his  worth,  of  his  achievements, 
and  of  his  rectitude  of  purpose,  he  scorned  to  defend 
himself  against  accusations  and  intrigues. 

It  was  due  secondly  to  the  magnetic  attraction  which 
difficulties,  obstacles  and  particularly  everything  in  the 
nature  of  a  combat  had  for  him.  If  there  was  any 
fighting  going  on  within  earshot,  however  little  it 
might  concern  him,  he  was  tempted  to  take  a  hand  in 
the  fray,  and  the  greater  the  odds  against  his  side,  the 
better;  the  natural  result  being  that  in  addition  to  the 
number  of  adversaries  and  detractors  whom  a  man 
normally  meets  in  the  struggle  for  success  and  power, 
he  was  continually  recruiting  enemies  in  quarters  that 
lay  outside  his  regular  marching  route,  not  all  of  whom 
fought  fairly. 

A  good  instance  of  this  propensity  is  afforded  by  his 
participation  in  the  fight  which  arose  from  the  antago- 
nism of  the  Alexander  and  Hyde  factions  in  the  Equi- 
table Life  Assurance  Society  in  1905.  Mr.  Harriman 
had  had  nothing  whatever  to  do  with  the  original 
trouble  or  with  the  Equitable  itself  except  that  he  was 
one  of  about  sixty  trustees  of  the  concern,  and  a  very 
inactive  one  at  that.     There  was  no  earthly  reason 


EDWARD     HENRY      HARRIMAN  37 

why  he  should  have  been  drawn  into  the  fierce  and 
bitter  contest  which  arose,  but  in  he  jumped  with  both 
feet  and  laid  about  with  such  vigor  that  in  the  end  he 
became  almost  the  principal  and  probably  the  most 
attacked  figure  of  the  conflict,  both  the  warring  fac- 
tions pausing  in  their  fight  against  each  other  to  pour 
their  fire  of  abuse  and  innuendo  upon  him. 

Probably,  of  the  many  campaigns  of  vituperation 
of  which  he  was  the  object  in  the  course  of  his  career, 
none  succeeded  so  well  in  poisoning  and  embittering 
the  public  mind  against  him.  Under  this  avalanche 
of  unfair,  baseless  accusations  he  kept  the  even  tenor  of 
his  way,  declining  to  dignify  them  by  defending  him- 
self in  public.  On  this  and  similar  occasions  I  urged 
him  to  speak  out,  to  make  use  of  the  means  at  his 
command  for  hitting  back  at  his  detractors,  and  those 
who  willingly  and  eagerly  gave  circulation  to  their 
slanders.     I  was  never  able  to  move  him. 

"Let  them  kick,"  he  used  to  say.  "It's  all  in  the 
day's  work.  After  a  while  they  will  tire  of  it.  Noth- 
ing tires  a  man  more  than  to  kick  against  air.  More- 
over, it  disconcerts  him,  and  not  finding  any  point  of 
resistance  he  is  very  apt  to  intensify  his  kicks  beyond 
all  measure  and  at  some  movement  of  particular  vio- 
lence to  kick  himself  off  his  feet.  Besides,  for  imme- 
diate effect,  they  have  the  advantage  because  they  will 
tell  lies  about  me,  and  I  won't  about  them.  And  as 
for  the  effect  in  the  long  run,  why,  the  people  always 
find  out  what's  what  in  the  end,  and  I  can  wait.  Let 
those  fellows  continue  to  shout  and  to  kick  against 
air.     I  need  my  time  and  energy  to  do  things." 


38      THE      LAST      FIGURE      OF     AN      EPOCH 

The  third  reason  for  the  widespread  and  long-con- 
tinued popular  misconception  in  respect  of  Mr.  Harri- 
man's  motives,  character  and  methods,  arose  from  the 
fact  that  he  failed  to  recognize,  as  indeed  most  finan- 
ciers of  his  day  failed  to  recognize,  that  a  man  holding 
the  power  and  occupying  the  conspicuous  place  he  did 
was  a  legitimate  object  for  public  scrutiny  in  respect 
of  his  ways,  purposes  and  actions,  and  that  if  oppor- 
tunity for  such  scrutiny  were  denied,  if  the  people  were 
met  instead  with  silence,  secrecy,  impatience  or  resent- 
ment of  their  proper  desire  for  information,  the  pub- 
lic mind  very  naturally  would  become  infected  with 
suspicion  and  lend  a  willing  ear  to  all  sorts  of  gossip 
and  rumors.  The  temptation  to  the  arbitrary,  exces- 
sive or  selfish  exercise  of  power  is  so  strong,  the  menace 
of  its  abuse  is  so  ever-present  to  the  public  conscious- 
ness, that  the  burden  of  proof  that  they  can  be  safely 
trusted  with  its  possession  is  rightly  laid  upon  those  in 
high  positions.  It  is  for  them  to  show  cause  why  they 
should  be  looked  upon  as  fit  persons  to  be  entrusted 
with  authority,  the  test  being  not  merely  ability,  but 
just  as  much,  if  not  more,  character,  self-restraint,  fair- 
mindedness  and  sense  of  duty  toward  the  public. 

Mr.  Harriman's  attitude  toward  the  law  of  the  land 
has  been  much  misinterpreted  and  misunderstood.  To 
begin  with,  he  had  profound  respect  for  the  moral,  the 
ethical  law,  and  under  no  circumstances  and  under  no 
temptation  would  he  ever  do  anything  which  was  not 
justified  before  the  tribunal  of  his  own  conscience,  his 
own  honest  conception  of  right  and  wrong. 

To  that  conviction  of  the  rectitude  of  his  purpose 


EDWARD     HENRY     HARRIMAN  39 

and  actions  was  added  the  firm  belief  in  himself  which 
is  a  characteristic  of  all  strong  men.  He  was  actuated 
by  a  profound  and  unwavering  faith  that  what  he, 
after  mature  thought,  felt  should  be  done,  was  best  for 
the  properties  of  which  he  was  the  directing  head,  was 
of  benefit  to  the  communities  which  they  served  as  well 
as  to  the  country  at  large  and  was  ethically  right  and 
proper  to  be  done. 

He  chafed  and  fretted  strenuously  when  the  letter 
of  some  statute,  possible  drawn  without  a  full  realiza- 
tion of  its  practical  effects,  stood  in  the  way  of  what 
he  considered  to  be  absolutely  proper  and  beneficial 
objects  to  accomplish.  He  was  irritable  and  impa- 
tient at  stupid  laws,  as  he  was  at  all  stupidity.  He 
had  to  be  shown  to  his  entire  conviction  that  the  law 
did  clearly  stand  in  the  way  before  he  would  desist 
from  a  purpose  which  he  deemed  just  and  right,  but 
the  realization  of  which  would  not  have  been  in  ac- 
cordance with  existing  statutes. 

If  there  were  substantial  doubt  he  would  be  tempted 
to  resolve  the  doubt  in  favor  of  his  purpose  and  go 
ahead;  whenever  possible,  he  would  be  a  law  unto  him- 
self, but  he  never  consciously  went  counter  to  any  ex- 
isting law — except  that,  to  be  entirely  veracious,  he 
may  have  winked  at  the  infraction  of  certain  provisions 
which  for  many  years,  with  the  full  knowledge  and 
sanction  of  the  constituted  authorities,  had  lain  dor- 
mant, and  for  lack  of  enforcement  had  come  to  be 
looked  upon  as  unenforceable  and  as  hardly  less  obso- 
lete than  the  old  Puritan  blue  laws. 

Nevertheless,  somehow  or  other,  true  to  his  fatal 


4-0      THE      LAST      FIGURE      OF     AN      EPOCH 

gift  of  getting  into  trouble,  he  managed  to  become  the 
storm-centre  around  which  the  agitation  for  reform  in 
railroad  laws  raged  most  violently.  He  was  held  up 
to  execration  as  the  arch-type  of  law-defying  corpora- 
tion managers,  he  was  singled  out  as  a  horrible  exam- 
ple, especially  in  connection  with  the  Chicago  and 
Alton  re-adjustment,  for  which,  by  the  way,  he  was 
only  partly  responsible,  but  for  which  he,  character- 
istically, took  upon  himself  the  full  responsibility  as 
soon  as  it  was  attacked,  as  he  realized  that  the  attack, 
though  nominally  directed  against  that  re-adjustment, 
was  really  directed  against  himself  personally. 

This  is  not  the  place  to  discuss  the  conception,  the 
execution,  and  the  ethics  of  the  Chicago  and  Alton  re- 
adjustment. It  was  planned  and  carried  out  during 
the  years  1899  and  1900  in  accordance  with  the  then 
prevailing  laws  and  following  a  formula  which  was 
not,  at  that  time,  regarded  as  objectionable.  Every 
step  in  connection  with  it  was  done  publicly  in  the 
full  light  of  day.  All  stockholders  were  treated  alike. 
The  service  of  the  railroad  was  improved,  the  capacity 
increased,  the  average  rate  decreased. 

In  the  course  of  the  fight  made  on  Mr.  Harriman  in 
1907,  this  transaction  was  gone  over  with  a  fine-tooth 
comb  by  the  federal  as  well  as  the  state  authorities  to 
discover  ground  for  a  suit;  but  no  point  whatever  was 
found  in  which  the  law  had  been  disregarded  or  vio- 
lated. 

Since  the  time  of  the  planning  and  consummation  of 
the  Chicago  and  Alton  re-adjustment,  public  opinion 
and  the  law  have  decreed  changes  in  corporate  meth- 


EDWARD      HENRY      HARRIMAN  4I 

ods.  A  transaction  of  this  kind  would,  could  and 
ought  not  to  be  effected  now  in  the  same  way  in  which 
it  was  effected  then.  But  it  was  and  is  entirely  unfair 
to  judge  actions  by  standards  other  than  those  prevail- 
ing at  the  time,  to  make  Mr.  Harriman  the  scapegoat 
for  practices  and  usages  which  had  not  then  fallen 
under  the  ban  of  public  disapproval,  and  to  judge  with 
retroactive  moral  severity,  in  the  light  and  according 
to  the  measure  of  latter-day  standards,  business  meth- 
ods which,  with  universal  knowledge  and  tolerance  on 
the  part  of  the  public  and  the  authorities,  had  prevailed 
in  the  past  for  many  years. 

The  land  was  set  ringing  with  denunciations  of  him ; 
he  was  made  the  text  for  violent  tirades  against  the 
iniquity  and  lawlessness  of  American  methods  in  gen- 
eral, and  of  Harriman  methods  in  particular. 

Mr.  Harriman  was  an  intensely  patriotic  man,  proud 
of  his  country,  its  institutions,  and  its  achievements, 
jealous  of  his  own  honor  and  of  America's  fair  fame 
abroad,  always  willing  and  eager  to  do  his  full  duty  as 
a  citizen  as  he  saw  it,  and  he  resented  deeply,  and  so 
did  his  friends,  the  efforts  of  his  detractors  to  represent 
him  as  a  lawbreaker,  and  his  phenomenal  success  as 
due,  at  least  in  part,  to  his  having  managed  to  evade/*; 
or  set  at  naught  the  laws  of  his  country. 

VI 

I  have  spoken  of  Mr.  Harriman's  love  for  a  fight, 
but — lest  this  be  misunderstood — I  should  add  that, 
like  every  truly  brave  and  strong  man,  he  never  picked 


42       THE      LAST      FIGURE      OF      AN      EPOCH 

a  quarrel.  On  the  contrary,  he  looked  upon  war  as 
waste,  and  he  abhorred  waste  as  a  cardinal  economic 
sin.  One  of  the  characteristics  of  the  old  methods  of 
railroad  management  was  for  each  company  to  seek  by 
every  means,  and  not  infrequently  by  underhand  and 
unfair  practices,  to  advance  its  own  interests  at  the 
expense  of  the  others,  and  there  existed  among  the  dif- 
ferent companies  a  constant  state  of  warfare  or  armed 
neutrality. 

The  true  interests  of  all  of  them,  and  often  the  in- 
terests of  the  public,  were  sacrificed  for  the  purpose  of 
obtaining  some  supposed  advantage  by  one  company 
at  the  expense  of  another.  Mr.  Harriman  was  fore- 
most among  those  who  advocated  and  worked  for  the 
more  enlightened  policy  of  "live  and  let  live,"  of  fair 
and  frank  dealing  and  legitimate  co-operation  among 
railroad  managers  in  the  interests  both  of  the  railroads 
and  of  the  public.  He  was  unsparing  of  his  time  and 
his  efforts  in  working  for  that  cause. 

He  never  started  hostilities  except  as  an  ultimate 
resource  in  self-defense,  or  to  safeguard  what  he  con- 
ceived to  be  vital  interests  of  the  properties  entrusted 
to  his  care.  Yet  he  was  a  born  fighting  genius,  and 
had  he  lived  in  an  earlier  age  he  probably  would  have 
ranked  among  those  who  with  their  swords  carved 
kingdoms  for  themselves  out  of  the  map  of  Europe  and 
founded  dynasties.  It  is  no  mere  phrase  to  say,  that 
he  never  knew  the  meaning  of  the  word  "fear" — either 
physical  or  moral.  And,  whatever  the  provocation  or 
danger,  whatever  the  weapons  used  by  the  enemy — and 


EDWARD     HENRY     HARRIMAN  43 

sometimes  they  were  poisoned  weapons — he  always 
fought  fair ;  he  never  struck  a  foul  blow. 

His  word  was  equally  good  to  friend  and  foe,  and 
it  was  truly  as  good  as  his  bond.  No  one,  not  even 
his  bitterest  opponents,  ever  accused  him  of  having 
gone  back  on  or  given  a  twisted  meaning  to  his  words. 
Never  did  he  break  faith — nor  consider  himself  free 
to  do  so  in  the  remotest  degree  toward  those  even  who 
had  flagrantly  broken  faith  with  him.  He  was  loyal 
to  a  fault.  In  more  cases  than  one  I  have  known  him 
to  take  upon  himself  the  whole  brunt  of  defense  or 
attack,  from  a  fine  feeling  born  of  chivalrous  considera- 
tion for  those  on  whom  he  might  have  unloaded  part 
of  the  burden,  and  from  a  proud  consciousness  of  his 
ability  to  cope  with  difficult  situations  single-handed 
and  unaided.  Never  have  I  met  any  one  more  utterly 
free  from  vindictiveness  and  malice.  Whether  from 
religious  sentiment  (for  he  was  deeply  and  genuinely 
religious),  from  principle,  or  simply  because  his  nature 
happened  to  be  constituted  that  way,  vengeance,  retri- 
bution were  no  concern  of  his.  When  an  opponent 
placed  himself  in  his  way,  he  used  only  just  so  much 
force  as  was  needed  to  get  him  out  of  the  road,  calmly, 
without  passion,  with  no  desire  to  hurt.  And  when 
the  tussle  was  over  and  he  had  overcome  his  antagonist 
and  taken  his  measure  and  mentally  registered  his 
make-up  and  methods,  the  incident — as  far  as  the 
personal  side  of  it  went — v/as  settled  and  closed. 

Likewise,  toward  those  whom  he  had  counted  as 
friends,  but  who  had  been  found  wanting  in  time  of 
stress,  when  he  needed  them  most,  or,  at  least,  cau- 


44      THE      LAST      FIGURE      OF      AN       EPOCH 

tious  and  lukewarm  in  their  support,  he  had  no  trace 
of  bitterness.  He  knew  thereafter  how  far  he  could 
count  on  them,  and  made  his  plans  accordingly — but 
that  was  all.  No  word  of  complaint  or  reproach,  no 
resentment,  no  "rubbing  it  in"  later  on  when  associa- 
tion with  him  became  again  prized  and  coveted,  no 
"crowing,"  no  "I  told  you  so"  when  events  came  his 
way  and  his  judgment  and  course  of  action  were  vin- 
dicated. 

It  would  require  a  volume  to  tell  the  tale  of  all  the 
contests  in  which  he  was  involved,  and  highly  inter- 
esting and  dramatic  it  would  be.  The  most  spectacu- 
lar episode  of  this  kind  in  his  career  was  the  contest 
for  the  control  of  the  Northern  Pacific  Railroad.  It 
was  entered  into,  not,  as  has  been  somewhat  widely 
believed,  from  ambition,  from  lust  of  power  or  aggran- 
dizement, but  in  defence  of  what  he  considered  vital 
interests  of  the  property  for  which  he  was  chiefly  re- 
sponsible and  which  he  held  to  be  gravely  menaced  by 
certain  acts  of  other  railroad  interests.  For  the  re- 
sulting unfortunate  "corner"  in  the  market  no  blame 
whatever  attaches  to  him,  and  more  than  one  of  the 
incidents  connected  with  the  entire  episode  entitle  him 
to  high  credit,  as  will  become  plainly  apparent  when 
the  true  and  full  story  of  the  case  is  published,  as  it 
will  be  some  day. 

When  the  smoke  of  battle  cleared  away,  the  Harri- 
man  side  was  found  to  be  in  possession  of  a  majority 
of  the  entire  capital  stock  of  the  Northern  Pacific 
counting  common  and  preferred  together,  while  their 
opponents  held  a  majority  of  the  common  stock  alone, 


EDWARD     HENRY     HARRIMAN  45 

by  a  small  margin,  but  not  of  the  entire  capital  stock. 
By  the  provisions  of  its  charter,  the  company  had  stipu- 
lated for  the  right  to  pay  off  its  preferred  stock  at  par. 

Needless  to  say,  so  important  and  essential  a  clause 
had  not  escaped  the  attention  of  Mr.  Harriman  and 
his  associates.  It  had  not  only  received  their  most 
careful  attention  before  they  decided  to  accumulate 
the  preferred  stock,  but  had  been  submitted  by  them 
to  five  leading  lawyers  in  different  parts  of  the  country, 
who,  acting  and  reporting  separately,  agreed  unani- 
mously in  their  answer  to  the  question  regarding  which 
they  were  asked  to  advise.  On  the  strength  of  these 
legal  opinions  and  of  other  circumstances,  Mr.  Harri- 
man was  convinced  at  the  time  and  ever  afterward  that 
he  held,  beyond  any  question  of  doubt,  the  winning 
hand. 

Instead  of  boldly  playing  it,  he  contented  himself 
with  a  drawn  battle  and  with  terms  of  peace,  which 
gave  to  the  other  side  the  appearance  of  victory. 
Thereby  hangs  a  tale,  exceedingly  eloquent  of  his  wis- 
dom, foresight  and  self-restraint  and  of  his  practice, 
to  which  I  have  alluded  before,  of  never  using  any 
greater  force  than  was  necessary  for  the  substantial 
accomplishment  of  his  object. 

VII 

Mr.  Harriman,  as  is  well  known,  left  an  exceedingly 
large  fortune,  yet  the  wealth  which  he  amassed  was 
but  a  small  fraction  of  the  wealth  which  his  construc- 
tive genius  created.     There  was  at  one  time  a  group 


46      THE      LAST      FIGURE      OF     AN      EPOCH 

of  railroad  men,  of  unsavory  memory,  who  made  their 
money  out  of  wrecking  and  pulling  down.  Their 
antithesis  was  Edward  H.  Harriman.  The  vast  bulk 
of  his  fortune  he  made  by  backing  the  country,  in  gen- 
eral, and  the  enterprises  to  which  he  mainly  devoted 
his  genius,  in  particular. 

Any  other  man,  who  had  the  same  faith  in  Mr. 
Harriman's  constructive  ability,  judgment  and  far- 
sightedness which  he  had  himself,  and  the  courage  to 
back  that  faith  as  Mr.  Harriman  did  many  a  time  by 
every  dollar  he  owned,  would  have  come  measurably 
near  to  reaping  the  same  financial  rewards  that  Mr. 
Harriman  did,  though,  of  course,  he  would  also  have 
had  to  have  Mr.  Harriman's  wisdom  and  self-control 
in  choosing  the  time  when  to  be  bold  and  when  cau- 
tious, when  to  venture  far  out  with  every  bit  of  can- 
vas spread  and  when  to  keep  close  to  shore. 

But  money-making  was  merely  incidental  with  Mr. 
Harriman  and  not  an  aim  in  itself.  It  attracted  him, 
to  begin  with,  as  a  sporting  proposition  to  catch  up 
with  men  who  had  an  enormous  start  over  him,  and 
as  every  sporting  proposition  attracted  him,  the  greater 
the  odds  against  him,  the  better.  (I  have  known  him, 
on  a  dare,  a  year  or  so  before  his  death,  to  put  on  boxing 
gloves  and  venture  on  a  friendly  bout  with  an  ex- 
pugilist — with  rather  painful  results,  it  is  true,  to  him- 
self.) In  the  next  place,  he  realized,  of  course,  that 
money  is  one  of  the  instruments  of  power,  one  of  the 
standards — though,  fortunately,  by  no  means  the  only 
one — by  which  success  is  measured,  and  he  required 
money,  much  money,  to  carry  out  his  plans  with  as 


EDWARD  HENRY  HARRIMAN     47 

little  dependence  on  others  as  possible,  just  as  a  general 
requires  soldiers.  He  was  a  man  of  very  simple  tastes 
and  few  wants,  though  when  he  became  very  rich  he 
lived  in  the  style  of  a  very  rich  man,  spending  money 
freely  and  largely,  but  never  ostentatiously  or  waste- 
fully.  It  is  worth  noting  that  he  never  had  any  doubt 
of  the  advent  of  his  opportunity,  though  he  had  to  wait 
till  he  was  nearly  fifty  years  old  before  fate  remem- 
bered him,  nor  of  his  becoming  a  very  wealthy  man, 
though  he  was  born  very  poor.  In  confident  anticipa- 
tion of  this  consummation,  he  bought  many  thousand 
acres  of  land  near  Tuxedo  twenty  years  before  he  had 
the  means  to  build  a  suitable  country  house.  Mrs. 
Harriman,  carrying  out  her  husband's  ideas,  has  most 
generously  presented  to  the  state  for  a  public  park 
10,000  acres  of  these  lands,  together  with  $1,000,000 
in  cash. 

His  real  purpose  to  which — as  I  said  before — 
money-making  was  merely  incidental,  was  to  do  big 
constructive  things;  his  real  sport  was  to  pit  his 
strength  and  brain  against  those  of  other  men  or 
against  difficult  tasks;  his  real  reward  was  the  con- 
sciousness of  worthy  accomplishment,  the  sense  of  mas- 
tery, the  exercise  of  power.  An  English  admirer  re- 
turning to  New  York  after  a  trip  over  the  Union 
Pacific  system  said  to  him  in  offering  congratulations 
on  the  condition  of  the  property:  "The  one  single 
piece  of  actual  railroading  of  which  I  should  think 
you  must  be  proudest  and  which  must  be  most  gratify- 
ing to  you  is  the  complete  success  of  your  wonderful 
bridge  over  the  Great  Salt  Lake,  for  the  feasibility  and 


48       THE      LAST      FIGURE      OF     AN      EPOCH 

the  undertaking  of  which  you  took  the  full  responsi- 
bility in  the  face  of  many  fruitless  attempts  in  former 
years,  and  in  the  face  of  almost  universal  disbelief  in 
its  practicability  as  a  durable  thing." 

Mr.  Harriman  replied : 

"No,  the  best  single  thing  we  did  and  which  gave 
me  most  satisfaction  was  this:  The  Colorado  River 
was  overflowing,  threatening  thousands  of  irrigated 
acres  in  the  Imperial  Valley,  which  would  have  meant 
destruction  to  the  lands  and  ruin  to  many  settlers. 
The  situation  became  more  and  more  serious,  the  Gov- 
ernment's efforts  to  control  the  river  proved  unavail- 
ing, and  finally  President  Roosevelt  telegraphed  me 
to  ask  whether  the  forces  of  men  and  engineers  we 
had  could  and  would  undertake  the  work  of  saving  the 
situation. 

"I  wired  our  representative  and  asked  him  how  long 
it  would  take  to  dam  the  flood  and  change  the  course 
of  the  river  and  what  the  expense  of  the  undertaking 
would  be.  He  reported  that  it  would  take  such  and 
such  a  time,  that  it  would  be  a  race  between  us  and 
the  flood,  with  our  having  a  margin  for  safety  pro- 
vided he  took  every  man  within  reach  from  all  other 
jobs  and  put  him  on  this  one,  and  provided  he  was  al- 
lowed to  proceed  regardless  of  cost.  He  estimated  the 
total  expense  at  a  somewhat  startling  figure,  and  added 
that  most  of  it  would  be  lost  if  we  did  not  finish  in 
time. 

"I  gave  direction  to  suspend  all  other  work,  and  to 
give  this  job  the  right  of  way  over  everything  else,  re- 
gardless of  disturbance  of  traffic  or  of  expense,  and  I 


EDWARD     HENRY     HARRIMAN  49 

telegraphed  President  Roosevelt  that  we  could  and 
would  undertake  the  task  of  saving  the  Imperial  Val- 
ley. And  then  we  started  on  the  race  with  the  ele- 
ments, and  I  used  every  ounce  of  driving  power  I  pos- 
sessed to  hustle  the  job  as  I  have  never  hustled  any 
job  before.  We  beat  the  flood  and  averted  untold  loss 
and  suffering.  That  was  the  best  single  bit  of  work 
done  on  my  authority  and  responsibility.  And" — he 
added — "here  you  have  a  case  with  a  vengeance,  of 
virtue  being  its  own  reward,  because  Congress  has 
never  yet  paid  us  back  our  outlay,  though  the  President 
sent  it  a  message  asking  that  we  be  reimbursed." 

An  incident  similarly  worth  recording  as  character- 
istic of  the  man  was  his  action  at  the  time  of  the  San 
Francisco  earthquake  and  conflagration.  When  the 
news  of  that  catastrophe  reached  New  York  he  not 
only  wired  directions,  without  a  moment's  loss  of  time, 
to  set  all  other  traffic  and  work  on  the  Union  and 
Southern  Pacific  lines  aside,  and  to  concentrate  all  the 
energy  and  facilities  of  these  organizations  upon  the 
task  of  rushing  relief  and  affording  assistance  to  the 
stricken  city,  irrespective  of  cost  to  the  railroads,  but 
he  hurried,  himself,  to  San  Francisco,  the  very  next 
morning,  without  giving  thought  to  personal  risk  and 
discomfort  and  his  presence,  counsel  and  co-operation 
were  of  no  little  advantage  to  that  community  in  its 
magnificent  struggle  to  recover  from  destruction  and 
chaos. 

That  Mr.  Harriman  was  a  man  of  vast  ambition, 
ever  restlessly  striving  forward  and  onward,  reaching 
one  goal  only  to  set  out  immediately  for  another,  goes 


5<D      THE      LAST      FIGURE      OF     AN      EPOCH 

without  saying.  And  boundless  as  his  ambition  was 
his  imagination,  both,  however,  regulated  and  held  in 
check  by  iron  self-discipline  and  by  the  lucidity  and 
sobriety  of  an  intellect  keen  as  a  sword's  edge.  In  a 
sense,  he  was  a  dreamer — but  his  dreams,  by  the  power 
of  his  genius,  became  realities.  To  him,  as  to  most 
great  constructive  and  creative  minds,  limitations  of 
time,  consideration  of  years  did  not  exist.  He 
planned  for  a  generation  ahead,  always  having  him- 
self in  mind  as  the  man  who  would  carry  the  plans  to 
realization,  giving  no  room  to  the  thought  that  he 
might  no  longer  be  there  to  do  so— again  a  trait  of 
which  history  records  many  instances  in  the  cases  of 
men  pre-eminent  in  creative  work. 

When  I  saw  him  in  Munich,  a  few  weeks  before 
his  death,  and  we  exchanged  reminiscences  anent  the 
achievements  of  the  last  ten  years,  he  said  to  me: 
"There  is  more  before  us  in  the  next  ten  years  than  we 
have  accomplished  in  the  last  ten."  Yet,  at  that 
time,  the  shadow  of  death  was  hovering  over  him,  he 
was  pitiably  and  pathetically  weak  and  frail,  he  could 
hardly  stand  up  without  support — but  his  spirit  and 
courage  were  as  dauntless,  his  brain,  will  and  faith  in 
himself  as  strong  as  ever.  He  fought  the  powers  of 
nature,  he  defied  the  physical  deterioration  which  was 
rapidly  breaking  him  up  with  the  same  indomitable 
pluck,  the  same  dogged  refusal  to  get  beaten,  with 
which  he  had  stood  up  against  difficulties  and  tribula- 
tions all  his  life. 

That  he  had  fully  prepared  to  make  true  the  predic- 
tion which  I  have  quoted  became  amply  apparent  after 


EDWARD     HENRY     HARRIMAN  51 

his  death.  In  fact,  the  evidence  then  disclosed  of  the 
scope  and  sweep  of  his  plans  and  the  point  to  which 
he  had  already  succeeded  in  conducting  them  came  as 
a  revelation  even  to  his  confidential  friends. 

I  once  heard  Mr.  C.  P.  Huntington,  president  and 
creator  of  the  Southern  Pacific  Railway,  say,  speaking 
of  the  art  of  managing  a  great  property:  "Watch  the 
details.  Then  the  whole  organization  will  watch  the 
details.  That  is  the  main  thing.  Big  matters  will  al- 
ways receive  attention  and  will  naturally  come  up  to 
you  anyhow."  And  I  have  heard  another  eminently 
successful  man  say  speaking  on  the  same  subject: 
"Don't  waste  your  strength  on  non-essentials.  Never 
do  yourself  what  you  can  hire  some  one  to  do  equally 
well  for  you.  Keep  your  head  and  time  free  for  the 
big  things,  for  those  things  which  must  emanate  from 
the  commander-in-chief  and  which  cannot  be  dele- 
gated." 

Mr.  Harriman's  method  was  a  middle  course  be- 
tween these  two  doctrines,  with  a  decided  leaning, 
however,  toward  Mr.  Huntington's  theory.  He  was 
a  tremendous  worker,  tireless,  utterly  unsparing  of  him- 
self, with  an  amazing  capacity  for  ceaseless  toil.  He 
demanded  much  of  his  co-workers  and  subordinates, 
but  far  more  of  himself. 

VIII 

The  crisis  in  Mr.  Harriman's  career  came  early  in 
the  year  1907.  A  few  of  his  bitterest  enemies  had  set 
out  the  year  before  on  a  carefully  planned,  astutely 


$2      THE      LAST      FIGURE      OF     AN      EPOCH 

prepared,  campaign  of  destruction  against  him.  To 
their  banners  flocked  a  number  of  those  whom  in  his 
conquering  course  he  had  met  and  vanquished;  some 
whom  by  his  rough  domineering  ways  he  had  unknow- 
ingly offended;  others,  who  were  simply  envious  and 
jealous;  certain  politicians  whose  ill-will  he  had  in- 
curred; many,  who  in  perfect  honesty  and  without  any 
axes  to  grind,  but  basing  their  opinion  mainly  on  hear- 
say, saw  in  his  personality,  his  methods,  his  ambition 
and  his  growing  power  a  real  menace  and  danger  to 
the  public  good,  and,  lastly,  a  few  who  had  reason  to 
throw  public  opinion  off  the  scent  and  to  divert  vigi- 
lance and  search  from  themselves  by  concentrating  it 
on  another. 

This  is  not  the  place  nor  has  the  time  yet  come  to 
describe  the  true  inwardness  of  this  remarkable  epi- 
sode which  has  in  it  all  the  elements  and  ingredients 
of  melodramatic  romance.  The  Harriman  Extermina- 
tion League — if  I  may  so  call  it — played  its  trump- 
card  by  poisoning  President  Roosevelt's  mind  against 
Mr.  Harriman,  with  whom  he  used  to  be  on  friendly 
terms,  by  gross  misrepresentations,  which  caused  him 
to  see  in  Mr.  Harriman  the  embodiment  of  everything 
that  his  own  moral  sense  most  abhorred  and  the  arch- 
type  of  a  class  whose  exposure  and  destruction  he 
looked  upon  as  a  solemn  patriotic  duty. 

With  Mr.  Roosevelt  leading  the  attack,  the 
"League"  felt  so  certain  of  its  ability  to  hurl  Mr. 
Harriman  into  outer  darkness,  defeat  and  disgrace, 
that  it  actually  sent  considerate  warning  to  his  close 
associates  to  draw  away  from  him  while  there  was  yet 


EDWARD     HENRY     HARRIMAN  53 

time  to  do  so,  lest  they  be  struck  by  fragments  of  the 
bomb  which  would  soon  explode  under  Mr.  Harriman, 
and  which  was  certain  to  demolish  him.  Mr.  Harri- 
man, of  course,  was  fully  aware  of  all  this.  He  braced 
himself  against  the  coming  blow,  but  did  nothing  to 
avert  it,  let  alone  run  away  from  it. 

In  February,  1907,  the  assault  was  begun  with  an 
investigation  by  the  Interstate  Commerce  Commission 
into  the  practices,  etc.,  of  the  Union  Pacific  Railroad, 
actually  into  those  of  Mr.  Harriman  himself.  His 
enemies  had  planned  better  than  they  knew.  Whether 
long  continued,  nerve  racking,  physical  suffering  had 
for  once  affected  his  otherwise  unfailing  judgment  (he 
told  me  later  that  during  the  year  1906  there  was  not 
a  day  in  which  he  was  not  tormented  by  severe  pain), 
whether  the  contemplation  of  the  Union  Pacific's  daz- 
zling prosperity  overcame  temporarily  the  hitherto  so 
potent  sobriety  of  his  brain  (he  had  just  amazed  the 
financial  world  by  placing  the  concern  on  a  10%  basis 
of  dividends  and  by  realizing  for  it  a  profit  of  $60,- 
000,000  on  the  sales  of  its  holdings  of  Northern  Pacific 
stock),  whether  for  once  his  vast  and  restless  ambition 
had  broken  through  his  calm  reasoning,  or  whether  it 
was  simply  an  unaccountable  solitary  error  of  judg- 
ment, such  as  is  found  in  the  career  of  so  many  among 
the  leaders  of  men — whatever  be  the  cause  or  the  ex- 
planation, he  took  action  in  that  year  which,  it  has 
always  seemed  to  me,  was  the  one  serious  mistake  of 
his  management  of  Union  Pacific  affairs. 

I  refer  to  the  purchases  of  very  large  amounts  of 
stocks  of  many  other  companies,  which  were  made  for 


54      THE      LAST      FIGURE      OF     AN      EPOCH 

the  account  and  placed  in  the  treasury  of  the  Union 
Pacific.  For  some  of  these  acquisitions,  it  must  be 
said,  there  was  valid,  legitimate  and,  in  fact,  almost 
compelling  reason,  even  at  the  then  prevailing  high 
prices,  but  for  others  it  was  and  is  difficult  to  discern 
sufficient  warrant,  especially  considering  the  time  and 
the  cost  at  which  they  were  made  and  the  effect  which 
they  were  likely  to  have  and  actually  did  have  on  pub- 
lic opinion. 

It  is  but  fair  to  add  that  the  problem  of  how  to  deal 
with  the  huge  cash  fund  realized  by  the  Union  Pacific 
through  the  sale  of  its  Northern  Pacific  stock  hold- 
ings was  difficult  and  complex  and  that  the  operation 
of  selling  Northern  Pacific  stock  and  reinvesting  the 
proceeds  in  the  stocks  of  other  lines  did  largely  in- 
crease the  annual  income  to  the  Union  Pacific.  Mr. 
Harriman,  although  admitting  in  later  discussions  that 
the  time  for  making  the  purchase  was  inaptly  chosen, 
so  far,  at  least,  as  prompt  action  was  not  more  or  less 
compulsory  to  forestall  developments  which  might 
have  been  seriously  detrimental  to  the  Union  Pacific 
— never  changed  his  belief  that  the  entire  transaction, 
looked  upon  primarily  as  a  change  of  investments,  was 
advantageous  to  the  Company,  and  would  ultimately 
be  found  to  carry  with  it  important  and  legitimate  col- 
lateral benefits. 

These  transactions,  first  becoming  known  to  the  pub- 
lic through  the  investigation  of  the  Interstate  Com- 
merce Commission,  which  gave  them  a  doubly  suspi- 
cious appearance  (they  would,  as  a  matter  of  course, 
have  been  disclosed  anyhow  in  the  next  annual  report 


EDWARD     HENRY      HARRIMAN  $$ 

of  the  Union  Pacific),  lent  color  to  the  impression  that 
Mr.  Harriman  was  aiming  at  a  gigantic  illegal  monop- 
oly of  the  railroad  industry.  The  resulting  public  re- 
sentment, intensified  by  the  simultaneous  unfair  and 
hostile  presentation  of  the  old  Chicago  and  Alton  trans- 
action, added  to  the  latent  irritations,  enmities  and  ap- 
prehensions which  his  career  and  his  ways  had  aroused, 
and  fanned  by  the  skillful  and  insidious  publicity  work 
of  the  Harriman  Extermination  League,  unchained 
upon  him  a  veritable  cyclone  of  criticism,  condemnation 
and  defamation. 

Mr.  Harriman,  on  the  witness  stand,  did  little  to  set 
things  right.  He  always  made  an  indifferent  witness, 
being  impatient  and  rather  resentful  and  defiant  under 
examination,  reluctant  to  explain  so  as  to  make  things 
plain  to  the  ordinary  understanding  and  disdaining  to 
defend  himself  against  accusations  or  innuendo. 

An  inflamed  public  sentiment  gave  ready  credence  to 
the  allegations,  accusations  and  insinuations  which  were 
spread  broadcast,  in  the  press,  from  the  platform,  in 
political  assemblies,  even  from  some  pulpits.  A  kind  of 
hysteria  of  fury  against  him  swept  over  the  land.  He 
was  denounced  and  anathematized  as  a  horrible  exam- 
ple of  capitalistic  greed,  iniquity  and  lawlessness.  The 
legal  machinery  of  the  nation  and  of  several  States  was 
set  in  motion  to  discover  some  breach  of  the  law,  how- 
ever technical,  of  which  he  might  be  held  guilty  and 
convicted.  Fairness  and  charity  were  thrown  to  the 
winds.  All  the  good  work  he  had  done  counted  as 
nothing.  Anything  said  in  defence  or  even  explanation 
was  contemptuously  and   indignantly  brushed  aside. 


56      THE      LAST      FIGURE      OF     AN      EPOCH 

His  punishment  was  clamored  for.  His  expulsion  from 
financial  life  was  demanded. 

Anybody  who  would  not  dissociate  himself  from  him 
was  exposed  to  being  looked  upon  as  particeps  criminis, 
a  sharer  of  his  guilt,  in  jeopardy  of  sharing  the  doom 
which  was  to  overtake  Harriman.  And  very  few  there 
were  who  remained  loyal  to  him,  and  still  fewer  who 
dared  believe  that  he  would  ever  recover  his  old  posi- 
tion of  prestige  and  influence.  Even  of  those  who  re- 
mained friendly  to  him  and  honestly  meant  well  by 
him,  the  greater  number  advised  him  to  bow  before  the 
storm,  temporarily  resign  from  the  presidency  of  his 
companies  and  retire  to  Europe  for  a  year,  giving  as  a 
reason  the  admittedly  unsatisfactory  condition  of  his 
health. 

Amidst  all  this  terrifying  din,  this  avalanche  of  vitu- 
peration, misrepresentation,  threatening  and  assault, 
amidst  the  desertion  of  some  friends,  the  lukewarmness 
of  others,  amidst  the  simultaneous  strain  and  stress  of  a 
financial  panic  (during  which,  moreover,  he  did  more 
than  his  full  share  in  the  work  of  support  and  relief), 
Mr.  Harriman  stood  firm  as  a  rock,  calm,  silent  and 
dignified,  his  courage  never  daunted,  his  spirit  never 
faltering,  strong  in  his  faith  in  himself  and  in  the 
potency  of  truth,  right  and  merit,  strong  in  the  ap- 
proval of  his  own  conscience  as  to  his  motives  and 
actions. 

He  did  not  complain.  He  asked  nobody's  help.  He 
made  no  appeal  for  sympathy,  He  told  no  one  that 
he  was  weak  and  ill  and  that  the  continuous  nervous 
strain  was  a  fearful  tax  on  his  impaired  health.     He 


EDWARD     HENRY     HARRIMAN  57 

stooped  to  no  weapon  not  sanctioned  by  the  rules  of 
gentlemanly  warfare  though  plenty  of  them  lay  ready 
to  his  hand  and  though  his  opponents  were  troubled 
by  no  such  scruple.  He  offered  no  compromise,  no  con- 
cession. He  did  not  budge  an  inch.  He  never  for  one 
moment  took  his  hand  off  the  helm — and  thus  he  rode 
out  the  storm. 

The  spectacle  of  a  man  undaunted,  opposing  his  soli- 
tary strength  and  will  to  overwhelming  odds,  is  always 
a  fine  and  inspiring  one.  There  have  been  contests  far 
more  important  and  spectacular  and  for  far  greater 
stakes,  but  I  doubt  whether  any  more  superb  courage 
in  bearing  and  daring  has  ever  been  demonstrated  than 
was  shown  by  Mr.  Harriman  in  those  long  months  of 
incessant  onslaught.  This  sounds  rhapsodical  and  ex- 
aggerated, but  it  is  not.  Only  one  who  in  that  period 
saw  him  from  close  by,  as  I  did,  who  had  the  privilege 
of  hearing  him  "think  aloud"  as  he  used  to  call  it, 
can  appreciate  the  marvel  of  the  lofty,  indomitable 
spirit  which  animated,  one  might  almost  say  which  kept 
together,  that  weak,  frail,  sick,  suffering  body. 

The  fight  lasted  for  a  full  year.  Gradually  the  as- 
pect of  affairs  began  to  change,  gradually  the  effect 
of  Mr.  Harriman's  brave  and  dignified  attitude  and 
masterful  strategy  began  to  tell.  One  fine  morning  it 
became  known  that  in  the  face  of  universal  discourage- 
ment, single-handed,  directing  matters  from  a  sick  bed, 
he  had  saved  a  very  important  railroad  from  bank- 
ruptcy, by  one  of  those  strokes  of  combined  boldness 
and  wisdom  which  had  become  familiar  to  those  who 


58       THE      LAST      FIGURE      OF     AN      EPOCH 

knew  him  best  and  which,  in  this  instance,  marked 
the  end  of  the  1907  panic. 


IX 

From  that  time  on  his  star  rose  rapidly  again.  The 
people  at  last  began  to  recognize  that  in  his  great  con- 
structive genius  they  possessed  a  national  asset  of  no 
mean  value.  They  also  recognized  that  the  man,  his 
motives  and  purposes  had  been  grievously  maligned 
and  misunderstood,  and  with  characteristic  impulsive- 
ness and  generosity  they  started  to  give  him  plentiful 
evidence  of  their  change  of  heart.  The  Harriman  Ex- 
termination League  broke  up.  The  more  generous  of 
its  members  frankly  acknowledged  his  great  qualities, 
admitted  that  he  had  been  wronged  and  became  his  ad- 
herents. Others,  from  self-interest,  made  haste  to  climb 
on  his  band-wagon.  Only  a  few  irreconcilables  con- 
tinued to  sulk  and  frown  but  no  longer  dared  to  attack 
him. 

He  himself  had  learned  in  the  bitterness  and  isola- 
tion of  that  one  year  that  even  the  strongest  cannot 
afford  with  impunity  to  ignore  or  be  lacking  in  consid- 
eration for  public  opinion,  and  to  allow  himself, 
through  aloofness,  secretiveness  or  otherwise,  to  be  mis- 
understood by  and  estranged  from  the  people.  He  be- 
came mellower  and  more  communicative.  His  door 
was  no  longer  closed  to  the  agencies  which  inform  and 
thereby  largely  mould  public  opinion.  He  no  longer 
resented  scrutiny  or  even  legitimate  curiosity.  He  went 
about  to  meetings  of  merchants,  shippers  and  farmers, 


EDWARD     HENRY     HARRIMAN  59 

occasionally  making  addresses,  and  altogether  "coming 
out  of  his  shell." 

The  last  year  of  his  life  resembled  a  triumphal  pro- 
cession. He  became  the  fashion,  the  hero  of  hundreds 
of  newspaper  and  magazine  articles,  a  popular,  almost 
a  romantic  figure.  He  was  lionized,  his  association  was 
coveted,  his  was  a  name  to  conjure  with,  he  was  in 
demand  for  great  business  occasions  as  a  popular  artist 
is  for  great  social  entertainments.  While  his  pride 
would  not  admit  it,  at  the  time  he  had  felt  deeply  and 
keenly  the  flood  of  slanders  and  attacks  upon  his  honor, 
honesty  and  character,  and  the  severe  condemnation 
passed  upon  him  by  public  opinion.  Though  he  was 
too  firmly  sustained  by  his  conscience  and  faith  for 
these  assaults  ever  to  have  caused  him  to  feel  humiliated 
or  to  hold  his  head  less  high,  yet  he  would  not  have  been 
human  if  he  had  not  been  gratified  by  the  sweeping 
change  in  sentiment  and  opinion  regarding  him.  But, 
in  a  way,  the  old  war-horse  did  not  feel  quite  at  ease 
as  a  spoiled  and  petted  show  animal.  He  said  to  me 
on  one  occasion  during  that  time: 

"It  seems  ungracious,  but  I  don't  really  like  that 
'pedestal'  business.  It  hampers  one's  freedom  of  move- 
ment. It  makes  a  fellow  self-conscious  if  he  knows 
that  he  is  expected  to  look  pretty  all  the  time.  I  feel 
as  if  I  was  wearing  an  evening  dress  suit  and  a  'dude's' 
high  stiff  collar  all  day  long." 

In  serious  moods  he  dwelt  upon  the  great  claim 
which  the  confidence  and  goodwill  of  the  people  gave 
them  upon  his  capacity  to  be  of  service  to  them.  He 
spoke  with  much  earnestness  of  his  full  and  willing 


60      THE      LAST      FIGURE      OF     AN      EPOCH 

recognition  of  the  resulting  duty,  in  the  exercise  of  those 
gifts  which  Providence  had  bestowed  upon  him,  not 
only  to  consider  (he  had  always  done  that),  but  to 
make  his  primary  aim  in  the  direction  of  his  activities, 
the  promotion  of  the  country's  welfare  as  it  was  given 
him  to  see  it. 

There  were  no  longer  any  enemies  to  trouble  him. 
The  opportunity  was  now  his  at  last  to  carry  out  his 
great  plans  of  constructive  work,  without,  as  hereto- 
fore, always  having  to  interrupt  himself  to  guard  his 
rear  and  flanks  against  attacks  or  to  dash  forward  and 
give  battle.  Having  been  elected  a  member  of  the 
board  and  executive  committee  of  the  New  York  Cen- 
tral Railroad,  a  position  which  he  had  long  desired  to 
hold,  his  mind  was  busily  occupied  with  plans  relating 
to  the  eastern  railroad  situation.  But  his  frail,  ill  body, 
which  had  been  kept  together — as  it  were — by  sheer 
force  of  will  as  long  as  the  fight  was  raging,  collapsed 
when  the  strain  and  tension  was  relaxed. 

In  the  early  summer  of  1909  he  went  abroad  in 
search  of  health.  A  few  months  later  he  returned  home 
to  die.  Those  who  were  present  at  his  landing  from 
the  steamer  and  who  accompanied  him  on  the  journey 
from  New  York  to  Arden,  his  country  place,  will  never 
forget  the  superb  exhibition  of  grit,  pluck,  self-control 
and  self-reliance  of  which  they  were  witnesses  on  that 
occasion. 

Mr.  Harriman  died  on  September  9,  1909,  in  his 
62nd  year. 

I  have  confined  this  sketch  in  the  main  to  matters 
and  considerations  incidental  to  Mr.  Harriman's  busi- 


EDWARD     HENRY     HARRIMAN  6l 

ness  career.  I  have  refrained,  among  other  things, 
from  touching  on  the  important  and  somewhat  stormy 
chapter  of  his  political  activities,  as  I  have  little  first- 
hand knowledge  regarding  them,  except  in  connection 
with  certain  episodes  which  are  too  recent  and  of  too 
personal  a  nature  to  discuss  at  present.  It  is  significant 
of  the  tendency  of  Mr.  Harriman's  development  that, 
though  he  had  graduated  from  the  "old"  school  of  poli- 
tics, he  grew  to  hold  rather  heterodox  views.  The 
statesman  for  whom  in  his  last  years  I  heard  him  often- 
est  express  admiration  and  respect  was  the  late  Gov- 
ernor Johnson,  the  progressive  Chief  Executive  of 
Minnesota. 

Although  regarding  him  as  excessively  advanced  in 
some  respects,  and  disagreeing  with  him  on  certain 
measures,  in  fact  on  certain  fundamentals  (Mr.  Harri- 
man  being  a  Republican  and  Governor  Johnson  a 
Democrat),  he  used  to  refer  to  him  as  the  type  of 
Radical  who  was  neither  demagogue,  hypocrite,  self- 
seeker  nor  time-server,  and  whose  leadership  would  be 
increasingly  within  lines  of  safety  and  soundness;  a 
sincere,  courageous  and  just  man,  open  to  reasoning  and 
conviction,  earnestly  and  painstakingly  in  search  of 
the  right,  free  from  that  instantaneous  and  intolerant 
"cocksureness"  in  dealing  with  intricate  economic  and 
other  problems,  which  he  looked  upon  as  an  irritating 
and  damaging  characteristic  of  many  reformers,  whose 
zeal  outruns  their  knowledge,  mental  discipline  and 
sense  of  responsibility  and  of  proportion. 

There  is  many  another  episode,  many  another  mani- 
festation of  Mr.  Harriman's  character  and  spirit  that  I 


62       THE      LAST      FIGURE      OF     AN      EPOCH 

might  and  should  like  to  relate,  but  that  I  must  pass 
over  because  of  the  limitations  both  of  time  and  of  dis- 
cretion. However,  the  picture  would  be  essentially  in- 
complete were  I  to  omit  referring  to  his  family  life, 
which  was  a  model  of  what  an  American  home  should 
be,  and  where  he  was  ever  surrounded  by  affection, 
gentleness,  devoted  care  and  sympathetic  understand- 
ing. Nor  should  mention  be  omitted  of  his  many  acts 
of  kindness  and  helpfulness,  of  his  ever  ready  and  gen- 
erous support  of  charitable  enterprises,  altruistic  ef- 
forts and  public-spirited  undertakings,  and  in  particular 
of  his  active  interest  in  the  Boys'  Club  of  the  City  of 
New  York,  of  which  admirable  institution  he  was 
President  for  many  years,  and  for  the  use  of  which 
he  erected  a  fine  building  at  the  corner  of  Avenue  A 
and  Tenth  Street. 

It  was  my  privilege  to  be  closely  associated  with  Mr. 
Harriman,  to  be  honored  with  his  friendship  and  con- 
fidence, to  see  him  almost  daily  during  twelve  years,  to 
gain  a  close  insight  into  the  workings  of  his  brain  and 
soul.  The  better  I  got  to  know  him,  whom  but  very 
few  knew  and  many  misunderstood,  the  greater  became 
my  admiration  for  that  remarkable  man,  the  deeper 
my  attachment.  I  am  not  blind  to  his  shortcomings, 
but  perfection  is  not  of  this  world,  and  I  believe  it  may 
be  truly  said  of  him  as  it  was  said  of  another  great 
man  that  his  faults  were  largely  those  of  his  genera- 
tion, his  virtues  were  his  own. 

I  have  said  before  that  he  came  to  hold  a  greater 
power  in  the  railroad  world  than  is  likely  ever  to  be 
held  again  by  any  one  man.    In  this  remark  I  had  refer- 


EDWARD     HENRY      HARRIMAN  63 

ence  not  only  to  the  very  exceptional  combination  of 
qualities  in  him  (I  know  of  no  parallel  to  this  particular 
combination  in  our  industrial-financial  history),  but 
even  more  to  the  fact  that  his  death  coincided  with 
what  appears  to  be  the  ending  of  an  epoch  in  our  eco- 
nomic development.  His  career  was  the  embodiment 
of  unfettered  individualism.  For  better  or  for  worse 
— personally  I  believe  for  better  unless  we  go  too  far 
and  too  fast — the  people  appear  determined  to  put  lim- 
its and  restraints  upon  the  exercise  of  economic  power, 
just  as  in  former  days  they  put  limits  and  restraints 
upon  the  absolutism  of  rulers.  Therefore,  I  believe, 
there  will  be  no  successor  to  Mr.  Harriman;  there  will 
be  no  other  career  like  his. 

To  tell  in  full  the  romance  of  that  wonderful  career, 
to  give  a  detailed  account  of  that  complex  personality, 
to  explain  and  make  clear  a  number  of  matters  the 
true  inwardness  of  which  has  never  yet  been  publicly 
told,  is  the  work  of  a  biographer,  which  I  hope  and 
believe  will  soon  be  undertaken.  I  have  tried  merely 
to  give  a  sketch  of  the  man's  main  characteristics  and 
essential  qualities  as  I  saw  them, — sympathetically  and 
admiringly,  I  admit;  truthfully  and  without  flattery,  I 
believe. 


PART  TWO:  CONCERNING  BUSINESS  AND 
ECONOMICS 


STRANGLING  THE  RAILROADS 


T 


HE  conflicts  and  the  storms  which  have  raged 
around  the  railroads  these  many  years  have  largely 
subsided.  Abuses  which  were  found  to  exist, 
though  it  is  fair  to  say  that  for  their  existence  the 
railroads  were  by  no  means  alone  to  blame,  have  been 
remedied  and  their  recurrence  made  impossible.  The 
people's  anger  has  cooled  and,  though  some  politicians 
still  sound  the  old  war-cry,  many  indications  (such, 
for  instance,  as  the  recent  popular  vote  against  the 
Full  Crew  Law  in  Missouri)  tend  to  show  that  the  peo- 
ple desire  to  have  the  railroads  fairly  and  justly  dealt 
with,  exacting  and  expecting  from  them  a  reciprocal 
attitude,  treatment,  and  spirit.  Railroad  executives 
have  come  to  recognize  their  functions  as  those  of 
semi-public  officers  owing  accountability  no  less  to  the 
public  than  to  the  shareholders  of  the  particular  prop- 
erty they  represent. 

The  system  of  private  ownership  and  operation  un- 
der governmental  regulation  and  supervision  as  it  has 
gradually  evolved  itself  in  America,  though  it  is  re- 
sented by  some  of  the  Bourbons  as  far  too  advanced 
and  an  indefensible  interference  with  the  rights  of 
property,  and  by  some  of  the  Ultra-Radicals  as  not 
going  far  enough,  seems  to  me  in  theory  an  almost 

February,  1916. 

67 


68  BUSINESS     AND     ECONOMICS 

perfect  one.  But  the  best  of  theories  is  futile  if  its 
practical  application  is  at  fault;  and  I  know  of  few 
more  flagrant  instances  of  the  unwise  and  unsound 
application  of  a  wise  and  sound  theory  than  in  the  case 
of  our  railroad  legislation. 

Writing  on  the  subject  of  control  and  regulation 
of  corporations,  Colonel  Roosevelt  in  a  recently  pub- 
lished article  expresses  himself  as  follows: 

".  .  .  When  we  control  business  in  the  public  in- 
terest we  are  also  bound  to  encourage  it  in  the  public 
interest,  or  it  will  be  a  bad  thing  for  everybody  and 
worst  of  all  for  those  on  whose  behalf  the  control  is 
nominally  exercised.   .   .   . 

"This  object  cannot  be  accomplished  by  a  chaos  of 
forty-eight  states  working  at  cross-purposes  in  the  de- 
velopment of  our  interstate  and  international  indus- 
trial fabric.  .  .  . 

"So  much  of  the  regulation  attempted  in  our  coun- 
try in  the  past  has  been  done  by  demagogues  or  by 
heedless  politicians  interested  only  in  their  own  mo- 
mentary political  success  that  the  very  name  Regula- 
tion has  become  an  offense  and  an  abomination  to 
many  honest  business  men." 

THE    ANTI-RAILROAD    ERA 

With  the  enactment  of  the  Hepburn  Bill,  during 
President  Roosevelt's  second  administration,  began  the 
modern  era  of  railroad  regulation  and  rate  control 
by  commissions.  It  was  a  measure  of  radical  inno- 
vation and  far-reaching  importance,  and  it  ought  to 
have  been  given  a  fair  test  in  practical  operation  for 
a  sufficient  length  of  time.     Instead,  President  Taft, 


STRANGLING     THE     RAILROADS  69 

in  1909,  felt  called  upon  to  propose  a  new  and  drastic 
measure  of  railroad  legislation.  He  embodied  his  rec- 
ommendations on  the  subject  in  a  bill  which  was  duly 
introduced  in  Congress.  It  was  far  from  being  a  per- 
fect piece  of  legislation.  The  odor  of  politics  was  not 
absent  from  it.  It  was  considered  by  the  railroads,  and 
in  business  circles  generally,  as  uncalled  for,  inapt,  and 
as  unduly  burdensome  and  restrictive  in  various  impor- 
tant respects.  But  at  least  it  was  a  consistent  and 
carefully  matured  measure.  It  was  the  formal  and  of- 
ficial expression  of  the  views  of  the  Taft  Administra- 
tion, the  second  important  measure  put  forward  by  it. 
It  offered  the  first  real  test  of  the  capacity  for  leader- 
ship and  of  the  fighting  edge  of  the  President  and  his 
Cabinet, — and  they  failed  under  that  test. 

The  introduction  of  the  Taft  railroad  bill  coincided 
with  a  stage  of  public  sentiment  when  suspicion,  ill- 
will,  and  resentment  against  corporations  were  ram- 
pant, when  inflammatory  appeal,  too  often,  took  the 
place  of  sober  reasoning;  and  demagogic  nostrums  for 
the  cure  of  social  and  economic  ills  met  with  ready 
acceptance  in  many  quarters. 

It  was  a  right  instinct  which  had  guided  the  people, 
under  President  Roosevelt's  leadership,  to  determine, 
firmly  and  unmistakably,  that  the  time  had  come  to 
regard  the  pioneer  period  of  this  country's  industrial 
and  economic  development  as  at  an  end,  to  revoke  the 
latitude  which  had  been  tacitly  accorded  during  that 
period,  to  insist  on  strict  adherence  to  the  rules  of  busi- 
ness conduct  laid  down  by  the  law,  and  to  punish  any 
violation  of  such  rules,  by  whomsoever  committed,  high 


70  BUSINESS     AND     ECONOMICS 

or  low.  It  was  right  to  have  recourse  to  the  law  in 
order  to  undo  some  of  the  things  which  those  charged 
with  the  administration  of  the  law  had  through  its 
non-enforcement  permitted  and  even  sanctioned.  It 
was  entirely  right  and  beneficial  to  set  up  and  proclaim 
a  new  standard  of  business  methods  in  certain  respects 
because  business  had  exercised  great,  and  in  some  ways 
excessive,  power  for  a  long  time,  and  all  power  tends 
to  breed  abuses  and  requires  limitations  and  restraints. 
It  was  salutary  and  timely  to  bring  home  to  corpora- 
tions and  individuals,  however  powerful,  the  respect 
and  fear  due  to  the  law  and  to  use  all  means  at  the 
Government's  disposal  to  visit  upon  dishonorable  prac- 
tices condign  punishment. 

But  it  was  unreasonable  and  unfair  to  judge  with 
retroactive  moral  severity  in  the  light  and  according 
to  the  measure  of  that  new  standard,  business  methods 
which  with  universal  knowledge  and  universal  toler- 
ance had  prevailed  in  the  past;  to  stigmatize,  as  hein- 
ous, certain  practices  which  did  not  in  their  essence 
involve  any  moral  turpitude,  certain  acts  which  became 
unlawful,  not  because  they  were  inherently  immoral  or 
dishonorable,  but  only  because  and  only  from  the 
moment  when  Congress  by  statute  declared  them  un- 
lawful, and  which,  too,  are  not  only  not  forbidden,  but 
are  expressly  sanctioned  by  the  laws  and  practices  of 
other  great  commercial  nations  such  as  England, 
France,  and  Germany. 

It  was  hardly  just  to  make  no  allowance  for  the  fact 
that  the  people  themselves  and  their  chosen  representa- 
tives cannot,  in  fairness,  be  entirely  absolved  from  re- 


STRANGLING     THE      RAILROADS  71 

sponsibility  for  the  regrettable  excesses  and  excrescences 
which,    together    with    much    splendid    and    fruitful 
achievement,  were  engendered  by  the  period  of  vast 
and  unparalleled  national  development  from  the  close 
of  the  Civil  War  to  the  first  years  of  the  present  cen- 
tury, as  similar  periods  of  rapid  material  advance,  in  all 
countries  and  at  all  times,  have  engendered  them.     It 
was  hardly  just  to  fail  to  give  due  weight  to  the  con- 
sideration that  if  certain  provisions  of  the  Anti-Trust 
Laws — now  suddenly  to  be  enforced  to  the  letter  with 
retroactive  rigor — had  come  to  be  lightly  regarded, 
indeed  almost  forgotten,  a  large  part,  if  not  the  larger 
part,  of  the  responsibility  should  be  laid  at  the  door 
of  those  whose  duty  it  was  to  enforce  the  law  and  who 
for  many  years,  through  administration  after  adminis- 
tration, Congress  after  Congress,  had  been  gravely  re- 
miss in  that  duty  and  had  thereby  permitted  these 
particular  statutes  to  fall  into  desuetude. 

Some  few  instances  of  wrongdoing  had,  indeed,  been 
brought  to  light  which  were  offences  against  the  writ- 
ten as  well  as  the  moral  law,  indefensible  under  any 
proper  standard  of  ethics;  but  it  was  neither  right  nor 
wise  to  permit  the  just  indignation  which  they  aroused 
to  lead  to  the  condemnation  and  punishment  of  an  en- 
tire vast  industry — not  to  mention  the  loss  thereby 
inflicted  upon  innocent  security  holders  and  the  damage 
caused  to  the  country  at  large. 

Given  the  then  prevailing  state  of  public  feeling,  the 
provisions  of  the  Taft  railroad  bill  afforded  a  peculiarly 
inviting  opportunity  to  those  whose  political  fortunes 
or  personal  prejudices  or  convictions  led  them  to  an 


72  BUSINESS     AND     ECONOMICS 

attitude  of  hostility  toward  the  measure  or  the  Ad- 
ministration, and  at  the  same  time  offered  a  tempting 
means  to  test  the  backbone — or  the  lack  of  it — and 
the  driving  power  and  influence  with  Congress,  of  Presi- 
dent Taft  and  his  Cabinet.  Certain  Senators  and  Con- 
gressmen were  not  slow  to  avail  themselves  of  that  sit- 
uation, and  they  succeeded  far  beyond  what  they  could 
reasonably  have  hoped  for.  They  laid  bare  in  this  first 
assault — for  all  men,  friends  and  enemies,  to  see  and 
be  guided  accordingly — that  peculiar  ineptitude  for 
practical  political  leadership,  that  lack  of  steadfastness, 
which  were  characteristic  foibles  of  the  Taft  Adminis- 
tration. 

Having  broken  down  the  bill  as  introduced;  its  op- 
ponents not  only  ripped  it  to  tatters  but,  to  a  large 
extent,  made  their  own  measure  out  of  it.  A  number 
of  provisions  which  were  actuated  by  regard  for  the  le- 
gitimate interests  of  the  railroads  were  torn  out.  The 
coherence  and  logic  of  the  measure  were  destroyed. 
Amendment  after  amendment  of  radical  manufacture 
was  added  by  a  Senate  leaderless,  weary,  and  in  a 
hurry,  some  of  these  amendments  embodying  the  weird 
and  crude  notions  of  those  to  whom  corporations  had 
long  been  the  object  of  fanatical  animosity  and  whose 
aim  was  simply  punitive,  even  vindictive. 

And  thus  the  bill  came  back  to  the  President.  Its 
fate,  from  every  consideration  of  political  wisdom  and 
self-respect,  should  have  been  a  Presidential  veto  ac- 
companied by  a  trenchant  message.  But,  instead,  Mr. 
Taft  tamely  submitted,  affixed  his  signature,  and,  by 
this  yielding  to  and  compromising  with  elements  bent 


STRANGLING     THE      RAILROADS  73 

on  embarrassing  and  harassing  him,  set  the  pace  for 
many  of  the  vicissitudes  which  thenceforth  beset  his 
Administration. 

Mr.  Taft  has  since  recognized,  it  seems,  the  faulti- 
ness  of  that  statute,  for  he  has  repeatedly  and  publicly 
protested  against  the  over-regulation,  the  starvation, 
and  the  oppression  of  the  railroads  which  were  the  in- 
evitable and  easy-to-be-foreseen  consequence  of  its 
enactment,  not  merely  because  of  what  it  contained  but 
equally  because  of  what  it  omitted.  For,  while  con- 
ferring upon  the  Interstate  Commerce  Commission  al- 
most absolute  power  over  the  interstate  business  of 
railroads,  it  entirely  ignored  the  correlated  problem  of 
the  exercise  of  control  by  the  states.  And  in  the  states 
a  veritable  mania  of  railroad  legislation  had  broken 
out.  Drastic  rate  reductions,  rigid  regulation,  full  crew 
and  similar  laws,  and  heavy  additions  to  already  dis- 
proportionate taxation  combined  to  bring  about  a 
medley  of  vast  and  inconsistent  complexity  of  restric- 
tions, burdens,  and  interferences,  superimposed  on  the 
structure  of  federal  legislation  and  regulation. 

There  is  no  parallel,  to  my  knowledge,  in  any  other 
country  to  the  enactment  which  places  our  greatest  in- 
dustry, down  to  its  minutest  details,  under  the  almost 
absolute  power  of  seven  men  owing  denned  account- 
ability to  no  one,  selected  for  relatively  short  terms  and 
according  to  no  particular  standard  of  training  or  quali- 
fications, and  being  practically  free  from  control,  re- 
straint or  appeal.  But  it  is  not  so  much  the  existence 
of  that  power,  excessive  though  it  be,  of  which  the  rail- 
roads complain.     Practically  all  railroad  men,  I  be- 


74  BUSINESS     AND      ECONOMICS 

lieve,  recognize  that  thorough  public  regulation  is  here 
to  stay.  Many  of  them  have  come  to  look  upon  the 
underlying  theory  and  principle  as  not  only  right  and 
wise  from  the  public  point  of  view,  but  even  as  bene- 
ficial from  the  point  of  view  of  the  best  interests  of  the 
railroads.  It  is  the  faultiness  and  inadequacy  of  the 
law  under  which  the  Interstate  Commerce  Commission 
works  and  exercises  its  power  and  the  multiplicity  of 
masters  under  whom  the  railroads  have  to  serve  and 
whom  they  have  to  satisfy  that  constitutes  the  main 
burden  of  their  grievances  and  that  cries  for  reform. 

The  Interstate  Commerce  Commission,  being  at  the 
same  time  prosecutor,  judge  and  jury,  combining  in 
itself  legislative,  executive  and  judiciary  functions,  may 
assuredly  be  termed  a  negation  of  the  root  principle 
from  which  the  American  system  of  government 
springs.  Such  combination  of  powers  in  one  body  has 
been  styled  by  James  Madison  "the  very  definition  of 
tyranny."  The  evil  and  impropriety  of  the  union  of 
conflicting  or  at  least  inconsistent  functions  vested  in 
the  Interstate  Commerce  Commission  has  been  pub- 
licly acknowledged  by  one  of  the  ablest  members  of 
the  Commission  itself,  Hon.  Charles  A.  Prouty,  in  an 
address  delivered  in  1907,  from  which  the  following 
extract  may  be  quoted:  "If  the  Interstate  Commerce 
Commission  is  vested  with  a  jurisdiction  so  tremen- 
dous in  extent  and  of  such  finality,  every  effort  should 
be  made  to  provide  a  body  adequate  to  the  trust. 
...  I  very  much  doubt  whether  the  same  body  can 
properly  discharge  both  these  functions  (executive  and 
judicial).     In  the  end  it  will  either  become  remiss  in 


STRANGLING     THE     RAILROADS  75 

its  executive  duties  or  will,  in  the  zeal  of  these,  become 
unfit  for  the  dispassionate  performance  of  its  judicial 
functions.  Whatever  may  have  been  true  in  the  past, 
the  time  has  come  when  the  Commission  should  be  re- 
lieved of  all  its  duties  except  the  hearing  and  deciding 
of  complaints." 

If  this  was  true  in  1907,  how  much  more  true  and 
urgent  is  it  today,  considering  the  immense  amplifica- 
tion and  extension  which  the  Commission's  powers  and 
functions  have  received  since  then. 

And  has  "every  effort"  been  made  "to  provide  a 
body  adequate  to  the  trust1?"  I  am  far  from  under- 
rating the  great  ability,  vast  industry,  and  devotion  to 
duty  of  the  men  now  composing  the  Interstate  Com- 
merce Commission,  nor  do  I  share  in  the  not-infre- 
quently-heard opinion  that  they  are  hostile  to  the  rail- 
roads on  principle.  I  believe,  on  the  contrary,  that 
they  are  earnestly  striving  to  do  justice  according  to 
their  conscience  and  judgment  and  are  bravely  strug- 
gling with  a  simply  intolerable  burden  of  work  and 
responsibility. 

But  it  cannot  be  gainsaid  that  on  this  Commission, 
which  has  greater  power  and  greater  responsibilities 
concerning  the  industrial  life  of  the  Nation  than  is  exer- 
cised by  probably  any  other  tribunal  anywhere  in  the 
world,  there  has  never  yet  been  appointed  a  man  who 
came  to  it  qualified  by  first  rate  experience  in  railway 
operation,  or  by  broad  business  experience,  or  any  con- 
siderable experience  in  financial  matters.  Nor  can  it 
tend  toward  providing  "a  body  adequate  to  the  trust" 
that  the  members  of  that  body,  called  upon  to  deal 


76  BUSINESS     AND     ECONOMICS 

with  questions  of  momentous  import  and  most  intri- 
cate complexity,  are  appointed  for  short  terms  and  paid 
salaries  so  modest  as  to  make  acceptance  of  such  ap- 
pointment a  very  great  financial  sacrifice  to  men  of 
first  rate  ability,  and  prolonged  continuance  in  office 
an  injustice  to  their  families. 

I  doubt  whether  anywhere  else  can  be  found  a  body 
of  seven  men  on  whom  devolves  the  stupendous  mass 
of  work  which  is  laid  upon  the  Interstate  Commerce 
Commission.  If  it  were  composed  of  the  wisest,  most 
expertly  trained  minds  and  most  vigorous  working  ca- 
pacities to  be  found  in  this  or  any  other  country,  it 
would  be  impossible  for  it  to  accomplish  the  super- 
human task  which  Congress  has  piled  and  keeps  piling 
upon  it.  According  to  its  annual  report  for  the  year 
ending  October  31st,  1915,  the  Commission  during  that 
year  conducted  1,543  hearings,  in  the  course  of  which 
it  took  the  almost  incredible  total  of  200,438  pages  of 
testimony,  and  it  must  be  borne  in  mind  that  this  is 
only  the  preliminary  work,  the  groundwork  on  which 
its  deliberations  and  decisions  are  based.  Within  that 
period  of  twelve  months  the  Commission  furthermore 
heard  oral  arguments  in  198  cases  (sitting  103  days  for 
that  purpose),  decided  902  cases  upon  its  "formal 
docket,"  entered  upon  its  "informal  docket"  6,500  sep- 
arate complaints  and  upon  its  "special  docket"  6,690 
applications,  made  822  orders  under  the  "long-and- 
short-haul-clause,"  etc.,  and  had  filed  with  it  no  less 
than  149,449  rate  schedules.  The  Committee's  report 
states  that: 


STRANGLING     THE     RAILROADS  77 

A  mere  recital  of  these  figures  scarcely  gives  an  ade- 
quate idea  of  the  volume  of  work  disposed  of  and  the 
enormous  interests  involved  in  the  cases  that  come  be- 
fore the  Commission. 

In  addition  to  the  activities  above  summarized,  it 
undertook  numerous  prosecutions  besides  transmitting 
many  cases  to  the  several  United  States  district  at- 
torneys, gathered  statistics,  collected  information,  made 
investigations,  answered  Congressional  inquiries  and 
conducted  a  correspondence  of  overwhelming  dimen- 
sions. 

It  is  a  physical  impossibility  for  each  of  seven  men 
to  read  carefully  200,438  pages  of  testimony  in  a  year, 
even  if  they  have  nothing  else  to  do.  Yet  the  Commis- 
sion not  only  has  to  decide  cases  in  which  200,438 
pages  of  testimony  have  been  taken,  but  it  has  to  hear 
as  many  arguments  as  are  heard  by  the  Supreme  Court; 
grant  or  refuse  almost  countless  exemptions  from  gen- 
eral rules  established  by  Congress;  initiate  and  super- 
vise criminal  prosecutions;  conduct  a  great  detec- 
tive bureau  for  the  purpose  of  discovering  infractions 
of  the  statute;  formulate  a  complex  system  of  ac- 
counts and  adapt  it  to  changing  conditions  or  changing 
conceptions  of  public  policy;  supervise  the  accounting 
of  more  than  two  thousand  corporations;  inspect  the 
physical  apparatus  employed  in  railway  transporta- 
tion and  devise  means  for  its  improvement;  enforce 
regulations  concerning  hours  of  labor;  determine  what 
water  facilities  railway  corporations  may  operate  and 
perform  numberless  other  duties  of  arduous  character 
and  vast  importance.     In  addition,  it  has  to  regulate 


78  BUSINESS     AND     ECONOMICS 

and  supervise  telegraphs,  telephones,  pipe  lines  and 
express  companies  and  to  grapple  with  the  formidable 
task  of  making  a  physical  valuation  of  the  railroads. 

For  years,  Congress  has  thrust  upon  the  Commission 
one  function  after  another  until  it  is  simply  over- 
whelmed. The  result  is  not  merely  delay  in  decision 
and  action  and  insufficient  time  for  deliberate  consid- 
eration, but  the  necessity  to  relegate  the  hearing  and 
investigation  of  many  important  cases  to  clerks  or 
agents.  With  every  desire  on  the  part  of  the  Commis- 
sioners for  the  conscientious  discharge  of  their  duties,  it 
is  inevitable  that  the  views  and  conclusions  arrived  at 
by  such  subordinates  must  have  a  large,  if  not  a  con- 
trolling, influence  on  the  decisions  of  the  Commission. 

It  is  a  regrettable  fact  that  no  recital  of  the  difficul- 
ties and  unjust  burdens  laid  upon  the  country's  great- 
est industry  would  be  complete  without  making  men- 
tion of  the  action  of  the  Postmaster  General  in  com- 
pelling the  railroads  to  accept  grossly  inadequate  com- 
pensation for  carrying  the  mail  and  the  parcel  post. 
If  any  large  corporation  were*  to  take  advantage  of  its 
position  and  power  as  the  Government  has  done  in  this 
instance,  it  would  not  take  long  for  the  Federal  Trade 
Commission  to  denounce  such  practices  and  to  compel 
redress  for  the  aggrieved  party. 

THE    PREDICAMENT    OF    THE    RAILROADS 

If  the  presentment  in  the  foregoing  pages  exhausted 
the  list  of  impediments  and  difficulties  under  which  our 
railroad  industry  is  laboring,  it  would  be  serious 
enough,  but  it  is  far  from  exhausting  them.     Indeed, 


STRANGLING     THE     RAILROADS  79 

what  is  probably  the  most  troublesome  complexity  con- 
sists in  the  fact  that  in  addition  to  the  activities  of 
State  legislatures  there  are  not  less  than  43  state  com- 
missions, exercising  varying  degrees  of  power  over  rail- 
roads, guided  in  their  decisions  by  no  precedents  or 
fixed  rules,  their  jurisdiction  and  their  decrees  inter- 
twining, conflicting  with,  upsetting  those  of  each  other 
and  of  the  Interstate  Commerce  Commis  ion.  In  22 
of  these  43  states  the  commissioners  are  chosen  by 
popular  vote,  their  terms  ranging  from  2  to  6  years, 
their  salaries  being  generally  very  moderate,  down  to  as 
low  as  $1,500  per  annum. 

It  is  not  surprising  that  the  authority  of  such  State 
commissions,  of  whom,  under  the  circumstances,  it 
would  be  too  much  to  expect  unyielding  imperviousness 
to  public  pressure,  should  have  been  exercised,  in  not 
a  few  instances,  frankly  for  the  selfish  interest  of  each 
State,  somewhat  on  the  lines  of  creating  through  the 
fixing  of  State  railroad  rates  and  otherwise  the  equiv- 
alent of  a  protecting  tariff  or  of  an  export  bounty  for 
the  benefit  of  the  industries  or  the  consumers  of  each 
particular  State.  Nor  will  it  be  wondered  at  that  there 
have  been  instances  of  a  tendency  to  use  the  commis- 
sions' authority  over  the  issue  of  stocks  and  bonds  to 
compel  the  railroads  to  spend  part  of  the  proceeds  of 
such  issues  for  purposes  which  to  the  commissioners  or 
their  constituents  appeared  advantageous  for  their 
particular  State  or  certain  localities  therein.  The  fol- 
lowing illustration  is  taken  from  the  annual  report 
of  the  Southern  Pacific  Company : 


80  BUSINESS     AND     ECONOMICS 

"To  provide  funds  for  corporate  purposes,  arrange- 
ments were  made  with  bankers,  in  May,  1913,  for 
sale  of  two-year  notes  at  a  very  satisfactory  price.  Au- 
thority of  the  California  Railroad  Commission  to  issue 
the  notes  was  obtained  without  delay ;  approval  by  the 
Arizona  Corporation  Commission,  however,  was  with- 
held, pending  certain  assurances  and  guaranties  on  the 
part  of  the  Company  with  reference  to  the  conduct  of 
its  business  in  Arizona  which  it  was  not  warranted  in 
giving,  and,  during  the  time  the  matter  was  pending 
before  the  Commission,  the  condition  of  the  money 
market  had  so  changed  that  a  sale  of  the  notes  could 
not  be  made.  Further  consideration  of  a  two-year  note 
issue  was  abandoned,  and  one-year  notes  were  issued 
instead,  and  sold  at  a  price  yielding  approximately 
$275,000  less  than  would  have  been  received  had  the 
two-year  notes  been  issued  without  delay.  Under  the 
laws  of  California  and  Arizona  the  issue  of  one-year 
notes  did  not  require  Commission  approval." 

In  several  cases  the  carrying  out  of  suggestions  made 
by  the  Interstate  Commerce  Commission  to  the  railroads 
with  the  view  to  enabling  them  to  obtain  more  ade- 
quate revenues  was  peremptorily  stopped  by  State  Com- 
missions who  ordered  the  railroad  not  to  do  the  very 
things  which  the  Interstate  Commerce  Commission  had 
told  them  they  should  do  and  had  criticised  them  for 
not  having  done  before. 

In  the  "Eastern  rate  case"  the  Interstate  Commerce 
Commission  found  that  the  carriers'  revenue  was  inade- 
quate and  insufficient,  but  declined  to  grant  the  greater 
part  of  the  increase  asked  for,  largely  on  the  ground 
that  there  were  other  ways  open  to  the  railroads  to  aug- 
ment their  income.    The  Commission  pointed  out  these 


STRANGLING     THE     RAILROADS  8l 

ways  in  considerable  detail,  but  when  the  railroads 
took  action  in  accordance  with  the  indications  or  direc- 
tions thus  given,  they  were,  as  to  the  most  important  of 
them,  promptly  estopped  by  State  Commissions  and 
Court  decisions.  Even  the  Interstate  Commerce  Com- 
mission itself  took  the  extraordinary  course  of  inter- 
vening to  prevent  the  railroads  from  carrying  into  ef- 
fect certain  measures  which  it  had  advised  them  to 
adopt,  and  the  feasibility  and  propriety  of  which  it 
had  given  as  among  the  reasons  for  not  granting  the 
rate  increases  as  asked  for. 

The  following  extracts  from  a  most  interesting  and 
instructive  address  recently  delivered  by  Mr.  Alfred 
P.  Thorn  before  the  State  Bar  Association  of  Ten- 
nessee may  appropriately  be  quoted  in  this  connection 
as  illustrating  the  activities  of  State  bodies: 

''Three  States  have  passed  laws  making  it  illegal 
for  a  carrier  having  repair  shops  in  the  State  to  send 
any  of  its  equipment,  which  it  is  possible  to  repair 
there,  out  of  the  State  for  repairs  in  another  State, 
fifteen  States  have  attempted  to  secure  preferred  treat- 
ment of  their  State  traffic,  either  by  heavy  penalties 
for  delays  or  by  prescribing  a  minimum  movement  of 
freight  cars,  some  of  them  requiring  a  minimum  move- 
ment of  fifty  miles  per  day,  whereas  the  average 
movement  for  the  United  States  is  not  more  than 
twenty-six  miles  per  day — one  of  these  States  imposing 
a  fine  of  ten  dollars  per  hour  for  the  forbidden  delay; 
twenty  States  have  hours-of-service  laws,  varying  from 
ten  to  sixteen  hours;  twenty  States  have  full-crew  laws; 
twenty-eight  States  have  headlight  laws,  with  varying 
requirements  as  to  the  character  of  the  lights,  and  four- 


82  BUSINESS     AND     ECONOMICS 

teen  States  have  safety-appliance  acts.  Sixteen  States 
have  enacted  statutes,  each  asserting  for  itself  the  in- 
dividual right  to  control  the  issue  of  stocks  and  bonds 
of  interstate  carriers. 

"It  is  manifest  that,  if  such  issue  is  to  be  regulated 
by  the  individual  States,  every  State  is  at  the  mercy 
of  the  others.  A  bond,  to  be  available  in  the  market, 
must,  as  a  rule — especially  now  when  most  bonds  are 
necessarily  junior  liens — be  secured  upon  the  whole 
railroad  line;  and  this  crosses  many  States.  One  of 
the  States,  therefore,  if  it  possesses  the  power  to  regu- 
late the  issue  of  securities  of  an  interstate  carrier,  may 
defeat  a  financial  plan  approved  by  all  the  other 
States  and  necessary  to  the  carrier's  transportation  effi- 
ciency. .  .  . 

"In  other  words,  the  greediest,  the  most  selfish,  and 
the  most  unreasonable  State  thus  secures  by  its  own 
laws  a  preference  for  its  own  commerce  over  the  com- 
merce of  its  sister  States  and  over  interstate  commerce 
itself." 

A   MASS   OF   CONFLICTING   LEGISLATION 

What  with  the  regulating  activities  of  43  Commis- 
sions besides  the  Interstate  Commerce  Commission,  the 
adoption  by  State  legislatures  of  rate-fixing  measures, 
extra  crew  bills,  and  all  kinds  of  minute  enactments 
(between  1912  and  1915  more  than  4,000  Federal  and 
State  bills  affecting  the  railroads  were  introduced  and 
more  than  440  enacted),  the  enormous  increase  within 
the  last  seven  years  in  Federal  and  State  taxation,  the 
steadily  mounting  cost  of  labor,  the  exactions  of  munici- 
pal and  county  authorities,  etc. — it  will  be  admitted 
that  the  cup  of  railroad  difficulties  and  grievances  is 
full. 


STRANGLING     THE      RAILROADS  83 

I  am  far  from  holding  the  railroads  blameless  for 
some  of  the  conditions  with  which  they  are  now  con- 
fronted. Not  a  few  of  them  were  arrogant  and  over- 
bearing in  the  days  of  their  power,  many  mixed  in 
politics,  some  forgot  that  besides  having  a  duty  to 
their  stockholders  they  had  a  duty  to  the  public,  some 
were  guilty  of  inexcusable  financial  misdeeds.  But,  in 
their  natural  resentment  and  their  legitimate  resolve  to 
guard  against  similar  conditions  in  the  future,  the  peo- 
ple have  overshot  the  mark.  The  proof  of  the  pudding 
is  in  the  eating.  Not  less  than  82  railroads,  comprising 
41,988  miles  and  representing  $2,264,000,000  of  capi- 
talization, are  in  receivers'  hands,  and  the  mileage  of 
new  railroad  constructed  in  1915  is  less  than  in  any 
year  since  the  Civil  War.  The  duration  of  receiver- 
ship has  become  longer  and  longer,  far  longer  than  it 
used  to  be,  owing  to  the  difficulty  of  raising  the  neces- 
sary funds  for  the  rehabilitation  of  the  properties  in 
the  face  of  the  growing  reluctance  of  the  public  to  in- 
vest in  railroad  securities  under  the  existing  conditions 
of  the  law  and  the  attitude  of  the  Commissions,  and 
further,  owing  to  the  complications  and  delays  resulting 
from  the  jurisdiction  and  views  of  State  Commissions. 

Thus,  the  Wabash  Pittsburgh  Terminal  has  been  in 
bankruptcy  since  May  29,  1908,  the  Wheeling  &  Lake 
Erie  since  June  8,  1908,  the  St.  Louis  &  San  Francisco 
since  May  27,  1913,  the  Wabash  from  December  26, 
1911,  to  November  1,  1915,  and  so  forth.  Railroad 
construction  has  practically  stopped,  the  purchases  by 
railroads  have  been  reduced  to  a  minimum,  so  much  so 
that,  had  it  not  been  for  the  windfall  of  the  "war 


84  BUSINESS     AND      ECONOMICS 

orders,"  our  steel  and  cognate  industries  would  have 
faced  an  exceedingly  serious  situation. 

Railroad  credit  has  become  gravely  affected.  It  is 
true  that  faults  of  management  and  disclosures  of  ob- 
jectionable practices  have  been  contributory  causes  in 
diminishing  American  railroad  credit,  but  from  my 
practical  experience  in  dealing  with  investors  I  have 
no  hesitation  in  affirming  that  the  main  reason  for  the 
multiplication  of  railroad  bankruptcies  and  of  the 
changed  attitude  of  the  public  toward  investing  in 
railroad  securities  is  to  be  found  in  the  Federal  and 
State  legislation  of  recent  years  and  in  what  many  in- 
vestors consider  the  illiberal,  narrow,  and  frequently 
antagonistic  spirit  toward  railroads  of  Commissions 
charged  with  their  supervision  and  control. 

The  fortuitous  and  fortunate  circumstances  that,  ow- 
ing mainly  to  the  direct  and  indirect  effect  of  the  stim- 
ulus of  huge  war  orders  for  our  industries,  and  be- 
cause of  other  unusual  circumstances,  railroad  earnings 
have  greatly  improved  of  late,  and  that  investors, 
after  having  left  railroad  securities  more  or  less  severely 
alone  for  several  years,  are,  for  the  time  being,  looking 
upon  them  with  a  friendlier  eye,  should  not  make  us 
lose  sight  of  the  underlying  facts  that  the  railroad 
industry  is  in  an  inherently  weakened  condition,  that 
the  spirit  of  enterprise  has  largely  gone  out  of  rail- 
roading and  that,  generally  speaking,  expenditures  for 
construction,  equipment,  improvements,  etc.,  are  con- 
fined to  the  absolute  necessities.  Nor  must  we  permit 
the  present  prosperity  of  the  country  to  make  us  ob- 
livious to  the  fact  that  the  full  measure  of  prosperity 


STRANGLING     THE     RAILROADS  85 

which  it  is  capable  of  attaining  or,  indeed,  any  per- 
manent and  comprehensive  and  healthy  state  of  pros- 
perity cannot  be  reached  while  its  most  important  in- 
dustry, that  of  railroading,  is  bureaucratized,  shackled, 
harassed  and  lamed. 

Incidentally,  it  is  worth  mentioning  that  if  the  ex- 
penditure of  time,  thought-  and  effort  which  the  num- 
berless and  intricate  requirements  of  the  Commissions 
impose  on  the  Chief  Executives  of  our  railroads,  could 
be  computed  together  with  the  expenditure  of  money 
for  lawyers  and  for  a  fair  sized  army  of  officials  and 
clerks  to  handle  the  work  incident  to  such  require- 
ments, the  resulting  figures  would  be  appalling.  I 
have  known  of  cases  where  for  days  at  a  time  all  the 
higher  officers  of  a  railroad  were  taken  away  from  their 
work,  having  to  attend  hearings  instead  before  Com- 
missions in  various  parts  of  the  country.  It  is  an  un- 
questioned fact  that  the  feeling  of  being  hampered  and 
harassed  by  incessant  and  minute  regulations,  of  having 
to  go  to  Commission  after  Commission  in  order  to  ob- 
tain the  sanction  of  a  bureaucratic  regime  for  almost 
each  and  every  step,  has  resulted  in  chilling  the  spirit 
of  initiative  on  the  part  of  those  in  charge  of  our  rail- 
roads, has  diminished  their  desire  for  and  satisfaction 
in  creative  activity  and  has  lessened  the  inducement  for 
ambitious  and  capable  young  men  to  embrace  the  career 
of  railroading. 

Considered  from  whatever  point  of  view,  the  con- 
clusion seems  to  me  unavoidable  that  American  railroad 
legislation,  while  sound  in  theory,  is  in  practice  a  patch- 
work, makeshift,  and  grossly  and  fundamentally  faulty. 


86  BUSINESS     AND      ECONOMICS 

It  has  been  added  to,  modified,  tinkered  with  session 
after  session  in  National  and  State  legislatures.  It  is 
illogical,  unscientific,  confusing,  vexatious  and  gen- 
erally intolerable.  The  Interstate  Commerce  Commis- 
sion and  43  State  bodies  acting  at  once  as  lawmakers, 
prosecutors,  judges  and  juries  hold  the  destinies  of  the 
railroads  in  their  hands,  with  the  power  almost  of  life 
and  death — a  power  not  much  short  of  autocratic.  Un- 
like the  courts  they  are  bound  by  no  precedents  and 
rules  of  procedure,  guided  by  no  fixed  and  well  under- 
stood principles  or  rules  of  decision.  The  Interstate 
Commerce  Commission,  over-burdened  with  labors  and 
duties  vastly  beyond  the  capacity  of  any  seven  men,  is 
bound  to  leave  much  important  work  to  subordinates. 
In  the  case  of  rate  decisions  it  is  compelled  to  resort  to 
postponements  which  in  effect  amount  to  denial  of  jus- 
tice, for  the  power  possessed  by  the  Commission  since 
1910  to  suspend  for  ten  months  proposed  rate  increases 
is  nothing  less  than  the  power — opposed  to  all  equity — 
of  inflicting  heavy  and  irrecoverable  monetary  penalties 
before  or  pending  trial.  Experience  has  shown  that 
the  Commission  in  practically  all  important  cases  avails 
itself  of  the  power  of  suspension  for  the  full  ten 
months'  period,  which,  as  a  matter  of  fact,  at  times  is 
even  further  prolonged.  And  the  railroads  have  no 
choice  but  to  consent  to  such  prolongation  rather  than 
have  the  Commission  compelled  to  render  an  opinion 
without,  in  the  pressure  of  its  other  work,  having  had 
time  to  give  sufficiently  thorough  and  mature  delibera- 
tion to  the  subject. 


STRANGLING     THE      RAILROADS  87 

SUGGESTED    REMEDIES 

Railroads,  being  essentially  nation-wide  in  their 
functions,  should,  as  to  rates  and  other  phases  of  their 
business  directly  or  indirectly  affecting  interstate  re- 
sults, be  placed  under  one  National  authority  instead 
of  being  subject  to  the  conflicting  jurisdiction  of  many 
different  States — a  jurisdiction  the  exercise  of  which 
is  always  subject  to  the  temptation  of  being  used  un- 
fairly for  the  selfish  and  exclusive  advantage  of  the  re- 
spective individual  States.  State  Commissions  have 
their  proper  and  important'  functions  in  the  supervision 
and  regulation  of  street  railways  and  of  public  service 
corporations  other  than  interstate  steam  railroads,  and 
even  in  the  case  of  the  latter  in  the  exercise  of  certain 
administrative,  police,  or  public  welfare  powers  within 
well  defined  limits.  But  the  fundamental  law  of  the 
land,  the  Federal  Constitution,  expressly  reserves  to 
Congress  the  exclusive  power  of  dealing  with  commerce 
between  the  States.  The  exercise  by  State  authorities 
of  rate-making  and  other  powers  which,  though  tech- 
nically confined  to  railroad  activities  within  the  States, 
yet  actually  must  and  do  affect  interstate  relations, 
appears  to  the  lay  mind  as  opposed  to  the  spirit  and 
intent  of  the  Federal  Constitution. 

Until  the  advent  of  the  railroad  legislation  of  recent 
years,  the  rate-making  power  in  interstate  commerce 
(and,  in  most  of  the  States,  also  for  intrastate  com- 
merce) was  in  the  hands  of  the  railroads,  subject  to 
judicial  review  upon  complaint.  Under  this  system 
the  rate  structure  of  American  railroads  was  built  up, 


88  BUSINESS     AND      ECONOMICS 

and  it  may  safely  be  asserted  that,  among  all  the  ac- 
cusations, just  and  unjust,  which  have  been  brought 
against  them,  the  charge  that,  generally  speaking,  the 
rates  thus  fixed  were  excessive  has  found  no  place.  On 
the  contrary,  the  rates  resulting  from  that  system  were 
much  the  lowest  prevailing  anywhere  in  the  world,  not- 
withstanding the  fact  that  wages  paid  by  American 
railroads  are  fully  twice  as  high  as  those  obtaining  in 
Europe. 

Under  the  bill  of  1910,  the  interstate  rate-making 
power  was  to  all  intents  and  purposes  conferred  upon 
the  Interstate  Commerce  Commission  (subject  to  inter- 
ference by  States  and  State  Commissions),  but  with 
characteristic  onesidedness  of  conception  the  power  to 
prescribe  minimum  rates,  which  manifestly  ought  to  be 
the  concomitant  of  the  power  to  prescribe  maximum 
rates,  was  not  given  to  the  Commission.  The  burden 
of  proving  according  to  the  requirements  of  an  unde- 
fined and  uncertain  standard  the  necessity  for  proposed 
rate  increases  was  thrown  upon  the  railroads. 

Personally,  I  believe  that  the  principle  of  giving  to 
the  Interstate  Commerce  Commission  power  to  regu- 
late rates  is  entirely  sound,  and  I  am  convinced  that  it 
has  come  to  stay.  But  I  think  that  the  now  prevailing 
rigid  and  cumbersome  system  of  what  is  practically 
rate-making  by  the  Commission  is  neither  sound  nor 
wise.  I  believe  that  the  public  could  and  would  be 
just  as  fully  protected  and  that,  in  fact,  both  the 
public  and  the  railroads  would  be  the  gainers  if  the 
immensely  complex,  difficult,  and  delicate  task  of  mak- 
ing rates  were  left  in  the  hands  of  those  trained  for  it 


STRANGLING     THE      RAILROADS  89 

by  a  life's  study,  experience,  and  practice,  i.  £.,  the 
railroad  officials,  with  full  power,  however,  in  the  Com- 
mission, on  its  own  motion,  to  reduce  or  to  increase 
rates  for  cause. 

A   HELPFUL   POLICY   NEEDED 

It  is  vital  to  our  railroads  and  indispensable  for  their 
capacity  to  serve  the  country  adequately  that  investors 
be  reassured  and  encouraged  as  to  the  safety  and  at- 
tractiveness of  investment  in  American  railroad  securi- 
ties, all  the  more  because  of  the  world-wide  competi- 
tion for  capital  which,  sooner  or  later  after  the  close 
of  the  European  war,  is  bound  to  set  in.  A  more  lib- 
eral and  helpful  policy  toward  railroads  should  be  in- 
augurated and  a  greater  margin  of  net  earnings  secured 
than  can  be  obtained  under  the  existing  rates  in  normal 
times.  In  this  connection  it  must  be  borne  in  mind 
that  such  margin  must  include  a  sum  over  and  above 
what  would  be  a  reasonable  dividend  because  the  na- 
ture of  the  railroad  business  makes  the  accumulation 
of  a  substantial  surplus  a  necessity  for  every  properly 
managed  line.  A  railroad  can  never  be  considered  a 
finished  product.  Expenditures  for  betterments,  re- 
placements, new  construction,  etc.,  are  continually  re- 
quired and  a  substantial  portion  of  these  outlays,  such 
as  for  the  elimination  of  grade  crossings  and  better 
station  buildings,  produce  no  direct  revenue. 

A  trifling  fraction  of  a  cent  added  to  rates  means  a 
vast  difference  to  the  railroads  applied  to  the  huge  total 
of  their  traffic,  while  very  little  felt  by  the  shipper  or 
producer,  and  hardly,  if  at  all,  by  the  consumer.    The 


90  BUSINESS     AND     ECONOMICS 

test  for  proposed  rate  increases  should  not  be  whether  a 
case  has  been  made  out  according  to  some  rigid  doc- 
trinaire or  legalistic  standard,  but  whether  it  has  been 
made  out  according  to  reason  and  equity  and  broad  con- 
siderations of  business  fairness  and  of  public  interest 
which  includes  the  preservation  of  railroad  credit  and 
due  regard  for  the  vast  and  far-reaching  importance  of 
the  railroad  industry. 

It  is  not  too  much  to  say  that  on  the  policy  and  atti- 
tude of  Congress  and  the  governmental  authorities,  on 
the  encouragement  or  discouragement  afforded  by  them, 
largely  depends  the  answer  to  the  question  whether 
or  not  railroad  development  is  to  keep  pace  with  the 
country's  potentialities,  opportunities  and  needs.  Capi- 
tal cannot  be  commandeered.  It  is  proverbially  timid 
and  its  owners  will  not  venture  forth  into  a  field  where 
they  must  be  in  doubt  from  one  year  to  the  next  as  to 
what  new  exactions,  burdens  and  restraints  may  be  laid 
upon  the  properties  in  which  their  investment  is  placed. 
If  railroad  officers  are  to  plan  for  the  future  in  a  large 
and  far-reaching  way,  if  an  adequate  supply  of  capital 
is  to  be  forthcoming  for  the  maintenance,  extension  and 
development  of  our  railroads,  there  must  be  not  only- 
reasonable  liberality  but  above  all  reasonable  stability 
of  policy.  In  other  words,  the  railroad  question  must 
be  taken  out  of  politics. 

The  present  lopsided  structure  of  railroad  laws 
ought  to  be  demolished  and  superseded  by  a  new  body 
of  laws  designed  to  aid  the  railroads  toward  the  great- 
est development  of  usefulness  and  service  to  the  coun- 
try, conceived  upon  harmonious,  constructive,  scientific 


STRANGLING     THE     RAILROADS  91 

and  permanent  lines.  The  reform  of  our  banking  and 
currency  laws  having  been  carried  into  effect,  the  re- 
construction of  our  railroad  laws  ranks  among  the  most 
pressing  and  vitally  needed  reform  in  the  economic  af- 
fairs of  the  country.  The  banking  and  currency  legis- 
lation of  1913  affords  an  appropriate  precedent  and  in 
many  respects  a  parallel.  The  national  functions  and 
character  of  the  railroads  are  largely  analogous  to  those 
of  the  national  banks.  Like  the  national  banks,  so 
should  the  railroads  be  free,  at  least  in  essentials,  from 
conflicting  and  multitudinous  jurisdiction  by  the  sev- 
eral States  and  placed  substantially  under  Federal  au- 
thority. And  like  the  national  banks,  they  should  not 
only  be  permitted  but  be  compelled  to  co-operate,  and 
thus  mobilized  for  the  maximum  extent  and  efficiency 
of  service ;  in  other  words,  pooling  and  kindred  arrange- 
ments should  be  sanctioned,  subject  to  the  approval  of 
the  Interstate  Commerce  Commission.  The  formula 
and  principle  of  the  banking  and  currency  legislation, 
viz.,  a  strong,  effective  and  controlling  Central  Federal 
Board  in  Washington,  relieved  from  detail  work  and 
from  certain  inherently  conflicting  functions  (which 
latter  should  be  conferred  upon  a  separate  body),  with 
Regional  Boards  according  to  geographic  groupings, 
might  prove  exactly  suited  to  railroad  legislation. 

To  the  extent  that  it  can  safely  be  done  without 
jeopardizing  the  due  protection  of  the  interests  and 
rights  of  the  public,  freedom  should  be  given  to  the 
railroads  in  the  conduct  of  their  business  coupled  with 
strictest  individual  responsibility  and  fullest  publicity. 
Railroads  shcald  be  relieved  from  the  unfair,  unreason- 


92  BUSINESS     AND     ECONOMICS 

able,  and  illogical  situation  of  being  subjected,  as  they 
now  are,  at  one  and  the  same  time  to  special  regulatory 
and  supervisory  legislation,  and  to  the  inhibitions  of 
the  Sherman  Anti-Trust  Law  which  is  based  upon  a 
theory  and  designed  to  serve  a  purpose  essentially  con- 
tradictory to  the  accepted  theory  and  purpose  of  our 
railroad  legislation.  Furthermore,  the  same  body 
which  determines  earnings  by  fixing  rates  should  be 
charged  with  the  responsibility  of  hearing  and  deter- 
mining wage  disputes  between  railroads  and  their  em- 
ployees; or  if  that  be  not  practicable  then  at  least 
with  the  duty  of  giving  full  weight  and  consideration 
to  all  factors  that  go  to  enhance  the  cost  of  operating 
railroads,  including  specifically  advances  in  wages  as 
well  as  legislative  enactments  like  the  full  crew  law, 
increased  taxation,  and  so  forth. 

Red  tape  should  be  cut  wherever  possible  and  bureau- 
cratic interference  limited.  By  all  means  let  us  have 
vigorous  governmental  action,  legislative  regulation, 
administrative  control  whenever  and  in  whatever  ways, 
after  mature  and  dispassionate  consideration,  it  appears 
best  in  the  interest  of  the  country.  But  such  action 
does  not  exclude — indeed  it  calls  for — wise  and  mutual- 
ly trustful  co-operation  between  business  and  the  legis- 
lative and  administrative  powers.  Assuredly,  it  is  nei- 
ther the  intent  nor  the  interest  of  the  people  that  any 
of  the  industries  of  the  country  should  be  subjected  to 
a  paternalistic  regime,  or  cramped  and  clogged  by  igno- 
rant interference,  bureaucratic  narrowness  or  partisan 
considerations.    Assuredly,  it  is  not  the  wish  of  the  peo- 


STRANGLING     THE     RAILROADS  93 

pie  that  the  activities  of  business  men  be  so  hampered 
and  confined  as  to  lame  the  initiative,  weaken  the  self- 
reliance,  chill  the  enterprise  and  zeal  and  joy  of  work 
which  have  always  been  their  characteristics  and  which 
have  so  greatly  contributed  toward  the  marvelous  de- 
velopment of  this  country. 

Fortunately,  there  have  been  indications  within  the 
recent  past  which  justify  the  hope  that  prejudices  and 
antagonisms  which  have  been  prevalent  all  too  long 
are  beginning  to  give  way  to  more  auspicious  relations. 
As  corporations  have  learned  the  lesson  that  their  well- 
being  depends  upon  their  so  conducting  themselves  as 
to  deserve  the  good-will  and  support  of  public  opinion, 
so  the  people  have  learned  that  their  own  prosperity 
and  the  prosperity  of  the  basic  industries  of  the  coun- 
try are  interdependent.  The  matter  and  manner  of  the 
passage  of  the  Federal  Reserve  Act,  the  spirit  and 
method  of  its  administration,  the  co-operation  between 
the  Treasury  and  the  banking  community  during  the 
first  few  months  of  the  European  war,  by  means  of 
which  what  threatened  to  become  a  most  serious  situa- 
tion was  met  and  successfully  overcome,  and  various 
other  occurrences  that  might  be  mentioned,  are  evi- 
dences of  a  new  spirit  expressing  itself  on  broad  and 
constructive  lines. 

Our  railroad  legislation,  on  the  other  hand,  both 
state  and  federal,  and,  in  too  frequent  instances,  its 
administration,  remain  glaring  examples  of  the  op- 
posite spirit;  and  that  vital  industry  cannot  perma- 
nently prosper,  nor  can  it  render  the  full  measure  of 


94  BUSINESS     AND     ECONOMICS 

service  for  which  the  vast  development  ahead  of  the 
country  calls,  until  relief  is  given  to  the  railroads  from 
the  legislative  and  administrative  conditions  which  now 
restrain  and  oppress  them. 


GOVERNMENT  OWNERSHIP  OF 
RAILROADS 

i 

1  ATERNALISTIC  control,  even  when  entirely 
benevolent  in  intent,  is  generally  harmful  in  effect.  It 
is  apt  to  be  doubly  so  when,  as  sometimes  occurs,  it  is 
punitive  in  intent. 

The  history  of  our  railroads  in  the  last  ten  years 
is  a  case  in  point. 

In  their  early  youth  our  railroads  were  allowed  to 
grow  up  like  spoiled,  wilful,  untamed  children.  They 
were  given  pretty  nearly  everything  they  asked  for, 
and  what  they  were  not  given  freely  they  were  apt  to 
get  somehow,  anyhow.  They  fought  among  themselves, 
and  in  doing  so,  were  liable  to  do  harm  to  persons 
and  objects  in  the  neighborhood.  They  were  over- 
bearing and  inconsiderate  and  did  not  show  proper 
respect  to  their  parent,  i.  e.,  the  people. 

But  the  fond  parent,  seeing  how  strong  and  sturdy 
they  were  and  on  the  whole  how  hustling  and  effec- 
tive in  their  work,  and  how,  with  all  their  faults  of 
temper  and  demeanor,  they  made  themselves  so  useful 
around  the  house  that  he  could  not  really  get  along 


An  address  before  the  National  Industrial  Conference  Board,  New 
York,  October  10,  1918. 

95 


96  BUSINESS     AND      ECONOMICS 

without  them,  only  smiled  complacently  at  their  occa- 
sional mischief  or  looked  the  other  way.  Moreover, 
he  was  really  too  busy  with  other  matters  to  give  proper 
attention  to  their  education  and  upbringing. 

As  the  railroads  grew  toward  man's  estate  and  mar- 
ried and  begot  other  railroads,  they  gradually  sloughed 
off  the  roughness  and  objectionable  ways  of  their  early 
youth,  and  though  they  did  not  sprout  wings,  and 
though  once  in  a  while  they  still  did  shock  the  com- 
munity, they  were  amazingly  capable  at  their  work 
and  really  rendered  service  of  inestimable  value. 

But  meanwhile,  for  various  reasons  and  owing  to 
sundry  influences,  the  father  had  grown  testy  and 
rather  sour  on  them.  He  cut  their  allowance,  he  re- 
strained them  in  various  ways,  some  wise,  some  less 
so,  he  changed  his  will  in  their  disfavor,  he  showed 
marked  preference  to  other  children  of  his.  And  finally, 
partly  because  he  was  annoyed  at  the  discovery  of  some 
wrongdoing  in  which,  despite  his  repeated  warnings,  a 
few  of  the  railroads  had  indulged  (though  the  over- 
whelming majority  were  blameless)  and  partly  at  the 
prompting  of  plausible  self-seekers  or  well-meaning 
specialists  in  the  improvement  of  everybody  and  every- 
thing— finally  he  lost  his  temper  and  with  it  his  sense 
of  proportion.  He  struck  blindly  at  the  railroads,  he 
appointed  guardians  (called  commissions)  to  whom 
they  would  have  to  report  daily,  who  would  prescribe 
certain  rigid  rules  of  conduct  for  them,  who  would 
henceforth  determine  their  allowance  and  supervise 
their  method  of  spending  it,  and  so  forth. 

And  these  commissions,  wishing  to  act  in  the  spirit 


GOVERNMENT     OWNERSHIP  97 

of  the  parent  who  had  designated  them,  but  actually 
being,  as  guardians  are  liable  to  be,  more  harsh  and 
severe  and  unrelenting  than  he  would  have  been  or 
really  meant  them  to  be,  put  the  railroads  on  a  starva- 
tion diet  and  otherwise  so  exercised  their  functions — 
with  good  intent,  doubtless,  in  most  cases — that  after 
a  while  those  railroads,  formerly  so  vigorous  and  capa- 
ble, became  quite  emaciated  and  several  of  them  suc- 
cumbed under  the  strain  of  the  regime  imposed  upon 
them.  And  then,  seeing  their  condition  and  having 
need,  owing  to  special  emergencies,  of  railroad  services 
which  required  great  physical  strength  and  endurance, 
one  fine  morning  the  parent  determined  upon  the  dras- 
tic step  of  taking  things  into  his  own  hands.  .  .  . 

II 

To  drop  the  style  of  story-telling:  Individual  en- 
terprise has  given  us  what  is  admittedly  the  most 
efficient  railroad  system  in  the  world.  It  has  done  so 
whilst  making  our  average  capitalization  per  mile  of 
road  less,  the  scale  of  wages  higher,  the  average  rates 
lower,  the  service  and  conveniences  offered  to  the  ship- 
per and  the  traveler  greater  than  in  any  other  of  the 
principal  countries. 

It  must  be  admitted  that  in  the  pioneer  period  of 
railroad  development,  and  for  some  years  thereafter, 
numerous  things  were  done,  and  although  generally 
known  to  be  done,  were  tolerated  by  the  Government 
and  the  public,  which  should  never  have  been  per- 
mitted.    But  during  the  second  administration  and 


98  BUSINESS     AND      ECONOMICS 

upon  the  courageous  initiative  of  President  Roosevelt 
these  evils  and  abuses  were  resolutely  tackled  and  a 
definite  and  effective  stop  put  to  most  of  them.  Means 
were  provided  by  salutary  legislation,  fortified  by  de- 
cisions of  the  Supreme  Court,  for  adequate  supervision 
and  regulation  of  railroads. 

The  railroads  promptly  fell  into  line  with  the  coun- 
trywide summons  for  a  more  exacting  standard  of  busi- 
ness ethics.  The  spirit  and  practices  of  railroad  ad- 
ministration became  standardized,  so  to  speak,  at  a 
moral  level  certainly  not  inferior  to  that  of  any  other 
calling.  It  is  true,  certain  regrettable  abuses  and  in- 
cidents of  misconduct  still  came  to  light  in  subsequent 
years,  but  these  were  sporadic  instances,  by  no  means 
characteristic  of  railroading  methods  and  practices  in 
general,  condemned  by  the  great  body  of  those  respon- 
sible for  the  conduct  of  our  railroads,  no  less  than  by 
the  public  at  large,  and  entirely  capable  of  being  dealt 
with  by  the  existing  law,  possibly  amended  in  non- 
essential features,  and  by  the  force  of  public  opinion. 

Unfortunately,  the  law  enacted  under  President 
Roosevelt's  administration  was  not  allowed  to  stand 
for  a  sufficient  length  of  time  to  test  its  effects.  The 
enactment  of  new  railroad  legislation  in  1909,  largely 
shaped  by  Congressmen  and  Senators  of  very  radical 
tendencies  and  hostile  to  the  railroads,  established,  for 
the  first  time  in  America,  paternalistic  control  over  the 
railroads.  It  was  a  statute  gravely  defective  in  im- 
portant respects  and  bearing  evidence  of  having  been 
shaped  in  heat,  hurry,  and  anger. 


GOVERNMENT     OWNERSHIP  99 

The  States,  to  the  extent  that  they  had  not  already 
anticipated  it,  were  not  slow  to  follow  the  precedent 
set  by  the  Federal  Government.  The  resulting  struc- 
ture of  Federal  and  State  laws  under  which  the  rail- 
roads were  compelled  to  carry  on  their  business,  was 
little  short  of  a  legislative  monstrosity. 

Ill 

You  all  know  the  result.  The  spirit  of  enterprise 
in  railroading  was  killed.  Subjected  to  an  obsolete 
and  incongruous  national  policy,  hampered,  confined, 
harassed  by  multifarious,  minute,  narrow,  and  some- 
times flatly  contradictory  regulations  and  restrictions, 
State  and  Federal,  starved  as  to  rates  in  the  face  of 
steadily  mounting  costs  of  labor  and  materials — that 
great  industry  began  to  fall  away.  Initiative  on  the 
part  of  those  in  charge  became  chilled,  the  free  flow 
of  investment  capital  was  halted,  creative  ability  was 
stopped,  growth  was  stifled,  credit  was  crippled. 

The  theory  of  governmental  regulation  and  super- 
vision was  entirely  right.  No  fair-minded' man  would 
quarrel  with  that.  But  the  practical  application  of  that 
theory  was  wholly  at  fault  and  in  defiance  of  both 
economic  law  and  common  sense.  It  was  bound  to  lead 
to  a  crisis. 

It  is  not  the  railroads  that  have  broken  down,  it  is 
our  railroad  legislation  and  commissions  which  have 
broken  down. 

And  now  the  Government,  in  the  emergency  of  war, 


lOO  BUSINESS     AND      ECONOMICS 

probably  wisely  and,  in  view  of  the  prevailing  cir- 
cumstances, perhaps  necessarily,  has  assumed  the  opera- 
tion of  the  railroads. 

The  Director  General  of  Railroads,  rightly  and  cour- 
ageously, proceeded  immediately  to  do  that  which  the 
railroads  for  years  had  again  and  again  asked  in  vain 
to  be  permitted  to  do — only  more  so. 

Freight  rates  were  raised  twenty-five  per  cent,  and 
more,  passenger  rates  in  varying  degrees  up  to  fifty  per 
cent.  Many  wasteful  and  needless  practices  heretofore 
compulsorily  imposed  were  done  away  with. 

Passenger  train  service,  for  the  abolition  of  some  of 
which  the  railroads  had  petitioned  unsuccessfully  for 
years,  was  cut  to  the  extent  of  an  aggregate  train  mile- 
age of  over  47,000,000. 

The  system  of  pooling,  for  which  for  years  many  of 
the  railroads  had  in  vain  endeavored  to  obtain  legal 
sanction,  was  promptly  adopted  with  the  natural  result 
of  greater  simplicity  and  directness  of  service  and  of 
considerable  savings. 

The  whole  theory  under  which  intelligent,  effective, 
and  systematic  co-operation  between  the  different  rail- 
ways had  been  made  impossible  formerly,  was  thrown 
into  the  scrap  heap. 

Incidentally,  certain  services  and  conveniences  were 
abolished,  of  which  the  railroad  managements  would 
never  have  sought  to  deprive  the  public,  and  the  very 
suggestion  of  the  abrogation  of  which  would  have  led 
to  indignant  and  quickly  effective  protest  had  it  been 
attempted  in  the  days  of  private  control. 


GOVERNMENT     OWNERSHIP  lOl 

IV 

For  a  concise  statement  of  the  results  accomplished 
elsewhere  under  government  ownership,  I  would  recom- 
mend you  to  obtain  from  the  Public  Printer,  and 
to  read,  a  short  pamphlet  entitled  "Historical  Sketch 
of  Government  Ownership  of  Railroads  in  Foreign 
Countries,"  presented  to  the  Joint  Committee  of  Con- 
gress on  Interstate  Commerce  by  the  great  English  au- 
thority, Mr.  W.  M.  Acworth.  It  will  well  repay  you 
the  half  hour  spent  in  its  perusal. 

You  will  learn  from  it  that,  prior  to  the  war,  about 
fifty  per  cent,  of  the  railways  in  Europe  were  state 
railways ;  that  in  practically  every  case  of  the  substitu- 
tion of  government  for  private  operation  (with  the  ex- 
ception, subject  to  certain  reservations,  of  Germany) 
the  service  deteriorated,  discipline  and  consequently  the 
punctuality  and  safety  of  train  service  diminished,  poli- 
tics came  to  be  a  factor  in  the  administration,  and  the 
cost  of  operations  increased  vastly.  (The  net  revenue, 
for  example,  of  The  Western  Railway  of  France,  which 
in  the  worst  year  of  private  ownership  was  $13,- 
750,000,  had  fallen  in  the  fourth  year  of  government 
operation  to  $5,350,000.)  He  quotes  the  eminent 
French  economist,  Leroy-Beaulieu,  as  follows : 

"One  may  readily  see  how  dangerous  to  the  liberty 
of  citizens  the  extension  of  the  industrial  regime  of 
the  State  would  be,  where  the  number  of  functionaries 
would  be  indefinitely  multiplied.  .  .  .  From  all  points 
of  view  the  experience  of  State  railways  in  France  is 
unfavorable  as  was  foreseen  by  all  those  who  had  re- 


102  BUSINESS     AND     ECONOMICS 

fleeted  upon  the  bad  results  given  by  the  other  indus- 
trial undertakings  of  the  State.  .  .  .  The  State,  above 
all,  under  an  elective  government,  cannot  be  a  good 
commercial  manager.  .  .  .  The  experience  which  we 
have  recently  gained  has  provoked  a  very  lively  move- 
ment, not  only  against  acquisition  of  the  railways  by 
the  State,  but  against  all  extension  of  State  industry. 
I  hope  .  .  .  that  not  only  we,  but  our  neighbors  also 
may  profit  by  the  lesson  of  these  facts." 

Mr.  Acworth  mentions  as  a  characteristic  indication 
that  after  years  of  sad  experience  with  governmentally 
owned  and  operated  railways,  the  Italian  Government, 
just  before  the  war,  started  on  the  new  departure  (or 
rather  returned  to  the  old  system)  of  granting  a  con- 
cession to  a  private  enterprise  which  was  to  take  over  a 
portion  of  the  existing  State  railway,  build  an  exten- 
sion with  the  aid  of  State  subsidies,  and  then  work  on 
its  own  account  both  sections  as  one  undertaking  under 
private  management. 

I  may  add  that  shortly  before  the  outbreak  of  the 
war  the  Belgian  Government  was  studying  the  ques- 
tion of  returning  its  State  railways  to  private  enter- 
prise and  management. 

Mr.  Acworth  relates  a  resolution  unanimously  passed 
by  the  French  Senate  a  few  years  after  the  State  had 
taken  over  certain  lines,  beginning  with  the  words: 
"The  deplorable  situation  of  the  State  system,  the  inse- 
curity and  irregularity  of  its  workings."  He  gives 
figures  demonstrating  the  invariably  greater  efficiency, 
economy,  and  superiority  of  service  of  private  manage- 
ment as  compared  to  State  management  in  countries 


GOVERNMENT     OWNERSHIP  I03 

where  these  two  systems  are  in  operation  side  by  side. 
He  treats  of  the  effect  of  the  conflicting  interests,  sec- 
tional and  otherwise,  which  necessarily  come  into  play 
under  government  control  when  the  question  arises 
where  new  lines  are  to  be  built  and  what  extensions  are 
to  be  made  of  existing  lines. 

He  asks:  "Can  it  be  expected  that  they  (these  ques- 
tions) will  be  decided  rightly  by  a  minister  responsible 
to  a  democratic  legislature,  each  member  of  which, 
naturally  and  rightly,  makes  the  best  case  he  can  for 
his  own  constituents,  while  he  is  quite  ignorant,  even 
if  not  careless,  of  the  interests,  not  only  of  his  neigh- 
bor's constituency,  but  of  the  public  at  large"?"  And 
he  replies :  "The  answer  is  written  large  in  railway  his- 
tory. .  .  .  The  facts  show  that  Parliamentary  interfer- 
ence has  meant  running  the  railways,  not  for  the  benefit 
of  the  people  at  large,  but  to  satisfy  local  and  sec- 
tional or  even  personal  interests."  He  says  that  in  a 
country  governed  on  the  Prussian  principles,  railroad 
operation  and  planning  may  be  conducted  by  the  Gov- 
ernment with  a  fair  degree  of  success,  as  an  executive 
function,  but  not  in  democratic  countries,  where  in  nor- 
mal times  "it  is  the  legislative  branch  of  the  govern- 
ment which  not  only  decides  policy  but  dictates  always 
in  main  outline,  often  down  to  the  detail  of  a  particu- 
lar appointment  or  a  special  rate,  how  the  policy  shall 
be  carried  out." 

For  corroboration  of  this  latter  statement  we  need 
only  turn  to  the  array  of  statutes  in  our  own  States, 
which  not  only  fix  certain  railroad  rates  by  legislative 
enactment,  but  deal  with  such  details  as  the  repair  of 


104  BUSINESS     AND      ECONOMICS 

equipment,  the  minimum  movement  of  freight  cars, 
the  kind  of  headlights  to  be  used  on  locomotives,  the 
safety  appliances  to  be  installed,  etc. — and  all  this  in 
the  face  of  the  fact  that  these  States  have  Public  Serv- 
ice Commissions  whose  function  it  is  to  supervise  and 
regulate  the  railroads. 

The  reason  why  the  system  of  state  railways  in 
Germany  was  largely  free  from  most,  though  by  no 
means  all,  of  the  unfavorable  features  and  results  pro- 
duced by  government  ownership  and  operation  else- 
where, is  inherent  in  the  habits  and  conditions  created 
in  that  country  by  generations  of  autocratic  and 
bureaucratic  government.  But  Mr.  Acworth  points 
out  very  acutely  that  while  German  manufacturers, 
merchants,  financiers,  physicians,  scientists,  etc.,  "have 
taught  the  world  a  good  deal  in  the  twenty  years 
preceding  the  war,  German  railway  men  have  taught 
the  world  nothing."  He  asks:  "Why  is  this?"  And 
his  answer  is:  "Because  the  latter  were  State  officials, 
and,  as  such,  bureaucrats  and  routiniers,  and  without 
incentive  to  invent  and  progress  themselves  or  to  en- 
courage or  welcome  or  even  accept  inventions  and  prog- 
ress. It  is  the  private  railways  of  England  and  France, 
and  particularly  of  America,  which  have  led  the  world 
in  improvements  and  new  ideas,  whilst  it  would  be  dif- 
ficult to  mention  a  single  reform  or  invention  for  which 
the  world  is  indebted  to  the  State  railways  of  Ger- 
many." 


GOVERNMENT     OWNERSHIP  I05 

V 

The  question  of  the  disposition  to  be  made  of  the 
railroads  after  the  war  is  one  of  the  most  important 
and  far-reaching  of  the  post-bellum  questions  which 
will  confront  us.  It  will  be  one  of  the  great  test  ques- 
tions, the  answer  to  which  will  determine  whither  we 
are  bound. 

And,  it  seems  to  me,  one  of  the  duties  of  business 
men  is  to  inform  themselves  accurately  and  carefully 
on  this  subject,  so  as  to  be  ready  to  take  their  due 
and  legitimate  part  in  shaping  public  opinion,  and  in- 
deed to  start  on  that  task  now,  before  public  opinion, 
one-sidedly  informed  and  fed  of  set  purpose  with 
adroitly  colored  statements  of  half  truths,  crystallizes 
into  definite  judgment. 

My  concern  is  not  for  the  stock  and  bond  holders. 
They  will,  I  have  no  doubt,  be  properly  and  fairly 
taken  care  of  in  case  the  Government  were  definitely 
to  acquire  the  railroads.  Indeed,  it  may  well  be,  that 
from  the  standpoint  of  their  selfish  interests,  a  reason- 
able guarantee  or  other  fixed  compensation  by  the 
Government  would  be  preferable  to  the  financial  risks 
and  uncertainties  under  private  railroad  operation  in 
the  new  and  untried  era  which  we  shall  enter  after  the 
war.  I  know,  in  fact,  that  not  a  few  large  holders  of 
railroad  securities  take  this  view  and  therefore  hold 
this  preference. 

Nor  do  I  speak  as  one  who  believes  that  the  railroad 
situation  can  be  restored  just  as  it  was  before  the  war. 
The  function,  responsibility,  and  obligation  of  the  rail- 


106         BUSINESS     AND      ECONOMICS 

roads  as  a  whole  are  primarily  to  serve  the  interests 
and  economic  requirements  of  the  nation.  The  dis- 
jointed operation  of  the  railroads,  as  in  the  past,  each 
one  considering  merely  its  own  system  (and  being  un- 
der the  law  practically  prevented  from  doing  other- 
wise) will,  I  am  sure,  not  be  permitted  again. 

The  relinquishment  of  certain  features  of  our  exist- 
ing legislation,  the  addition  of  others,  a  more  clearly 
defined  and  purposeful  relationship  of  the  nation  to 
the  railroads,  involving  among  other  things  probable 
participation  of  the  Government  in  railroad  earnings 
over  and  above  a  certain  percentage,  are  certain  to  come 
from  our  experiences  under  Government  operation  and 
from  a  fresh  study  of  the  subject,  in  case  the  railroads 
are  returned  to  private  management,  as  I  trust  and  be- 
lieve they  will  be. 

In  theory  and  in  its  underlying  principles,  the  sys- 
tem of  public  policy  toward  the  railroads,  as  gradually 
evolved  in  America,  but  never  as  yet  given  a  fair  chance 
for  adequate  translation  into  practical  execution,  ap- 
pears to  me  an  almost  ideal  one.  It  preserves  for  the 
country,  in  the  conduct  of  its  railroads,  the  inestimable 
advantage  of  private  initiative,  efficiency,  resourceful- 
ness, and  financial  responsibility,  while  at  the  same 
time  through  governmental  regulation  and  supervision 
it  emphasizes  the  semi-public  character  and  duties  of 
railroads,  protects  the  community's  rights  and  just 
claims  and  guards  against  those  evils  and  excesses  of 
unrestrained  individualism  which  experience  has  indi- 
cated. 

It  is,  I  am  profoundly  convinced,  a  far  better  system 


GOVERNMENT     OWNERSHIP  IO7 

than  government  ownership  of  railroads,  which,  wher- 
ever tested,  has  proved  its  inferiority  except,  to  an  ex- 
tent, in  the  Germany  on  which  the  Prussian  Junker 
planted  his  heel  and  of  which  he  made  a  scourge  and  a 
dreadful  example  to  the  world. 

And  the  very  reasons  which  have  made  State  rail- 
ways measurably  successful  in  that  Germany  are  the 
reasons  which  would  make  Government  ownership  and 
operation  in  America  a  menace  to  our  free  institutions, 
a  detrimental  influence  upon  our  national  qualities  of 
thought  and  action,  and  a  grave  economic  disservice. 


SUGGESTIONS  CONCERNING  THE 
RAILROAD  PROBLEM 


! 


T  is  one  of  the  characteristic  qualities  of  the  Amer- 
ican people  to  learn  quickly.  A  single  year's  experi- 
ence has  sufficed  to  demonstrate  to  the  people  at  large 
that  Government  operation  of  railroads  means  deteri- 
oration in  service,  higher  cost,  lessened  eagerness  to 
please  the  shipper  and  study  his  convenience — not  to 
mention  the  menace  of  politics  becoming  a  determin- 
ing factor  in  the  fixing  of  wages,  in  new  construction, 
improvements  and  other  items  of  railroad  administra- 
tion and  policies. 

I  believe  that  a  decisive  majority  of  the  farmers, 
the  shippers  and  the  consumers  in  general  have  made 
up  their  minds  that  in  this  country  Government  opera- 
tion of  railroads  is  not  wanted. 

Every  right-thinking  man  must  wish  to  see  railroad 
labor,  as  indeed  all  labor,  content  and  liberally  com- 
pensated. The  just  claims  of  labor  are  the  first  charge 
upon  any  industry.  They  take  precedence  over  the 
claims  of  capital  and  those  of  the  consumer  in  gen- 
eral. 

But  it  is  not  reconcilable  with  the  American  theory 
of  government  to  give  to  any  executive  department 

A  paper  read  before  the  Brooklyn   Chamber  of  Commerce,  Febru- 
ary 18,   1919. 

108 


THE     RAILROAD     PROBLEM  IO9 

the  power,  without  a  searching  public  hearing  before 
at  least  a  semi-judicial  body,  to  increase  the  wages  of 
one  class  of  labor,  as  was  done  in  the  case  of  railroad 
workers,  by  the  stupendous  sum  of  $600,000,000— 
$800,000,000  a  year  and  to  apportion  it  by  rigid  and 
undiscriminating  classification. 

The  increase  in  wages  actually  paid  in  the  year 
1918  is  officially  stated  at  $583,000,000,  but  I  am 
informed  that  when  the  increases  granted  are  in  full 
effect  for  a  complete  year,  they  are  expected  to  reach 
approximate^  $800,000,000.  The  tax  thus  placed 
upon  the  consumers  of  the  country,  particularly  the 
shippers  and  farmers,  is  equal  to  the  total  interest  on 
our  entire  war  debt  (excluding  loans  to  allied  nations) 
and,  capitalized  at  four  and  one-half  per  cent.,  repre- 
sents a  principal  sum  of  approximately  $18,000,000,- 
000,  i.  e.  approximately  the  same  as  the  total  cost  of 
the  war  to  America,  or  very  nearly  the  same  as  the  total 
capitalization  of  all  the  railroads  in  the  country. 

An  increase  in  wages  was  justly  due;  indeed,  in  many 
cases  overdue.  No  doubt,  the  Committee  selected  by 
the  Director  General,  upon  the  investigation  and  recom- 
mendation of  which  his  action  was  based,  did  its  work 
ably  and  conscientiously.  The  increase  granted  may 
not  be  more  than  was  justly  due.  Its  apportionment 
may  have  been  fully  justified.  But,  after  all,  it  is  the 
public  which  pays  the  bill,  and  the  public  had  no  op- 
portunity to  formulate  views  or  make  itself  heard  on 
the  subject  before  action  was  taken. 

It  may  not  be  inappropriate  to  point  out  in  com- 
parison to  the  increase  of  about  $800,000,000  granted 


HO  BUSINESS     AND     ECONOMICS 

to  labor  over  and  above  its  existing  compensation,  that 
the  total  compensation  which  capital  (including  there- 
in the  brain  work  and  enterprise  which  have  gone  into 
the  building  up  of  the  American  railroad  system), 
receives  in  the  shape  of  rental  for  all  of  the  railways 
of  the  country,  is  about  $900,000,000  per  year.  But 
that  sum  includes  interest  on  borrowed  money  to  the 
extent  of  about  $500,000,000  per  year.  There  is  thus 
left  as  compensation  to  the  owners  of  the  roads  the  sum 
of  about  $400,000,000  (apart  from  about  $165,000,- 

000  income  derived  from  miscellaneous  physical  prop- 
erty and  "non-operating  income"). 

The  total  wages  paid  to  railroad  labor  for  the  past 
year  are  estimated  at  $2,400,000,000,  i.  e.,  six  times  as 
much  as  the  compensation  paid  to  the  owners  of  the 
roads.  If  the  owners  went  without  any  compensation 
at  all,  the  amount  thereby  made  available  would  cover 
but  one-half  of  the  increase  in  wages,  which  has  been 
granted  to  labor. 

Nor  is  the  effect  of  the  increase  in  wages  measured 
even  by  the  huge  sum  of  $800,000,000,  at  least  as  far 
as  unskilled  labor  is  concerned,  for  it  is  bound  to  affect 
wages  in  other  industries  and  particularly  the  wages 
which  the  farmer  has  to  pay,  and  thus  to  react  upon 
the  cost  of  living  of  the  whole  community. 

Once  more,  I  concede  unqualifiedly  that  railroad  la- 
bor was  entitled  to  an  increase  in  wages.  Nor  do  I 
dispute  the  awards  made  by  the  Director  General,  as 

1  am  not  in  possession  of  the  facts  and  considerations 
upon  which  these  awards  were  based.  I  am  simply 
showing  by  actual  facts  the  immensity  of  the  power 


THE      RAILROAD     PROBLEM  111 

left  to  the  discretion  of  one  man,  and  I  am  pointing  out 
the  extent  and  effect  of  these  wage  increases  and  the 
proportion  between  the  compensation  paid  respectively 
to  labor  and  to  capital  engaged  in  the  railroad  indus- 
try. 

The  program,  in  support  of  which  I  believe  public 
opinion  is  crystallizing  more  and  more,  is: 

1.  Let  the  Government  exercise  strong  and  com- 
prehensive control,  but  fair  and  constructive,  not  puni- 
tive or  strangling. 

2.  Let  those  features  of  operation,  which  under 
Government  management  have  proved  advantageous 
and  convenient  to  the  public,  be  preserved  and  those 
features  of  legislation  and  administration,  which  expe- 
rience has  shown  to  be  unduly  and  unwisely  hamper- 
ing, be  abolished. 

3.  Without  eliminating  State  commissions,  let  their 
functions  be  so  adjusted  as  to  avoid  conflict  with  the 
Federal  Commission  in  matters  of  rate-making  and 
security  issues. 

4.  Let  railroading  then  be  thrown  open  to  private 
initiative  and  enterprise  and  competition  in  service; 
make  it  an  attractive  field  for  capital,  and,  above  all, 
for  men  of  ability  and  vision. 

If  there  is  one  thing  less  desirable  than  outright  Gov- 
ernment operation,  it  is  Government  control  so  minute, 
hampering  and  all-pervasive  as  to  be  tantamount  to 
Government  operation,  without  corresponding  respon- 
sibility. Most  of  the  plans  which  have  been  put  for- 
ward within  recent  weeks  from  individual  quarters, 
would  mean  this  very  thing.     Their  authors  start  by 


112  BUSINESS     AND     ECONOMICS 

declaring  themselves  utterly  opposed  to  Government 
operation,  and  then  devise  a  set  of  provisions,  which 
to  all  intents  and  purposes,  are  equivalent  to  Govern- 
ment operation,  or  would  necessarily  lead  to  it.  A 
feature  common  to  all  such  plans,  and,  in  my  opinion, 
their  fatal  defect  and  largely  the  explanation  of  their 
self-contradictory  character,  is  that  they  are  based  upon 
a  permanent  Government  guarantee  of  minimum  earn- 
ings for  the  railroads. 

The  two  things,  i.  e.,  private  management  and  per- 
manent  Government  guarantee  of  earnings,  are  simply 
not  reconcilable.  The  railroads  cannot  eat  their  cake 
and  have  it.  You  cannot  rent  your  house  to  some 
one  and  then  expect  to  be  master  in  your  house.  If 
the  railroads  want  to  have  private  management  in  fact, 
instead  of  merely  in  name,  they  must  take  their  chances 
and  rely  upon  public  opinion  for  a  square  deal.  If  they 
are  not  willing  to  do  that,  if  they  ask  the  people  to 
protect  them  by  giving  them  a  permanent  guarantee 
of  minimum  earnings,  the  people  will  rightly  insist 
upon  such  minute  and  exacting  safeguards  as  to  amount 
in  effect  to  Government  operation. 

Personally,  I  am  wholly  opposed  to  the  timid  oppor- 
tunism which  would  barter  away  the  reality  of  private 
initiative  and  enterprise  for  a  permanent  governmental 
guarantee  of  earnings.  If  we  cannot  as  citizens  be  con- 
vinced that  bureaucratic  management  is  preferable  to 
individual  effort,  we  must  not  as  stock  or  bondholders 
permit  ourselves  to  be  bribed  into  making  a  compromise 
with  our  convictions.  And  I  am  optimistic  enough  to 
believe  that  by  deserving  the  good-will  and  confidence 


THE      RAILROAD      PROBLEM  1 13 

of  the  people,  and  making  adequate  efforts  to  keep  them 
correctly  informed,  the  railroads  will  get  a  square  deal 
from  the  people. 

I  think,  indeed,  that  public  opinion  has  come  to  rec- 
ognize, not  from  tender  regard  for  the  railroads,  but 
from  enlightened  self-interest,  that  the  roads  must  be 
given  such  treatment  henceforth  and  permitted  such 
opportunity  as  will  attract  a  free  flow  of  capital;  be- 
cause, otherwise,  one  of  two  things  is  bound  to  result : 
stagnation  in  the  railroad  industry,  which  means  in- 
adequate and  insufficient  service  for  a  growing  and  de- 
veloping country,  or  Government  ownership  and  opera- 
tion, which  means  politics,  bureaucratic  regime,  deteri- 
oration in  service  and  increased  cost. 

If  we  are  agreed  that  what  we  want  is  real  private 
management  under  strict  but  fair,  workable  and  con- 
structive Government  supervision  and  regulation,  with 
no  permanent  guarantee  of  earnings  (but  rather  per- 
haps introducing  the  principle  of  profit-sharing),  it 
seems  to  me  that  the  framing  of  appropriate  legislation 
presents  no  extraordinary  difficulty,  provided  that  an 
equitable  basis  of  rate-making  is  established  and  de- 
fined with  sufficient  preciseness  to  enable  the  railroads 
to  obtain  actually,  instead  of  merely  theoretically  as 
heretofore,  the  protection  of  the  courts  against  the  im- 
position of  unduly  low  rates. 

I  hesitate  to  express  opinions  as  to  this  thorny 
point,  concerning  which  so  many  better  qualified  than 
I  appear  to  hold  conflicting  views,  but  I  venture  to 
throw  out  these  suggestions  for  what  they  may  be 
worth : 


114  BUSINESS     AND     ECONOMICS 

Scientific  rate-making  is  an  impossibility.  A  mathe- 
matical, uniformly  applicable  formula  for  rate-making 
might  have  been  possible  when  the  railroads  started  to 
come  into  being.  It  is  no  longer  possible  now.  The 
rate  structure  is  the  product  of  a  great  many  years  of 
testing,  experimenting,  adapting,  bargaining  between 
the  railroads  and  shippers,  consumers,  ports,  cities,  etc., 
in  short  the  result  of  evolution.  It  is  of  infinite  intri- 
cacy, of  manifold  and  subtle  inter-relationship. 

It  is  no  more  practicable  to  make  it  over  at  this  late 
date  on  lines  of  theoretical  perfection,  than  it  is  prac- 
ticable to  make  over  on  such  lines  a  large  city,  the 
growth  of  generations. 

Capitalization  or  over-capitalization  has  no  effect 
whatever  on  rate-making,  nowadays.  I  doubt  whether 
it  ever  had  any  substantial  effect. 

Even  the  true  value  of  railroad  properties,  as  ascer- 
tained by  valuation  (to  the  extent  that  it  can  be  so 
ascertained)  can  merely  be  one  of  the  factors  in  rate- 
making. 

But  I  realize  that  to  satisfy  public  opinion,  a  large 
portion  of  which  suspects  the  railroads  of  taxing  the 
people  to  pay  dividends  on  watered  stock,  an  authori- 
tative appraisal  of  the  true  values  of  railroad  prop- 
erties must  be  had.  I  think  a  fair  appraisal  on  such 
principles  as  the  courts  will  uphold,  will  show  that  the 
railroads  on  the  whole  are  not  over-capitalized  and 
that  existing  rates  certainly  do  not  err  on  the  side  of 
giving  more  than  a  fair  return. 

The  valuation  of  the  railroads,  on  which  the  Inter- 
state Commerce  Commission  has  been  engaged  for  sev- 


THE      RAILROAD      PROBLEM  H5 

eral  years,  will  probably  take  a  few  years  still  to  com- 
plete, and  some  of  the  resulting  awards  will  supposedly 
have  to  be  reviewed  by  the  courts  before  they  can  be- 
come definitely  established. 

My  suggestions,  in  view  of  these  circumstances,  are : 
1.  Until  the  valuations  are  completed,  let  the 
I.  C.  C*  or  other  authority  (having  first  been  granted 
exclusive  power  or,  at  least,  paramount  authority  in 
rate-making)  be  directed  to  consider  the  existing  rates 
as  prima  facie  fair  and  reasonable  on  the  basis  of  ex- 
isting wages  and  costs,  subject  to  such  adjustment  of 
inequalities  or  injustices  between  localities  and  shippers 
as  the  I.  C.  C.  may  determine.  It  might  be  better  still 
to  confer  these  functions  on  Regional  Committees  com- 
posed of  Railroad  officials  and  shippers,  subject  to  the 
I.  C.  C.'s  casting  vote  in  case  of  disagreement. 

2.  If  wages  and  cost  of  materials  decrease  pending 
the  completion  of  the  valuation,  let  rates  decrease  pro- 
portionately as  near  as  may  be,  as  determined  at  rea- 
sonable, not  too  frequent,  intervals;  but  pending  such 
completion,  rates  are  not  to  be  diminished  below  fig- 
ures which  will  yield  upon  the  existing  capitalization 
an  aggregate  return  equivalent  approximately  to  that 
yielded  from  the  rental  now  being  paid  by  the  Gov- 
ernment for  the  use  of  the  railroads,  plus  a  fair  re- 
turn upon  such  new  money  as  may  be  put  into  the  prop- 
erties. If  that  yield  is  not  found  sufficient  to  restore 
railroad  credits  and  provide  needed  funds  under  the 
circumstances  prevailing  now  or  from  time  to  time,  let 

*  Interstate  Commerce  Commission. 


Il6  BUSINESS     AND      ECONOMICS 

the  return  be  made  such,  in  the  judgment  of  the  I.  C.  C, 

as  to  accomplish  that  necessary  purpose. 

3.  In  the  new  railroad  legislation  about  to  be 
framed  by  Congress  let  it  be  precisely  defined,  instead 
of  having  merely  a  vague  and  unenforceable  formula 
as  heretofore,  what  items  are  to  be  considered  by  the 
I.  C.  C.  (or  such  regional  bodies  as  may  be  appointed) 
in  fixing  rates  after  the  termination  of  the  temporary 
situation  covered  by  suggestions  1  and  2.  The  prin- 
cipal ones  among  those  items  are,  of  course:  Wages, 
cost  of  materials,  and  a  return  on  the  fair  value  of 
railroad  properties  at  a  sufficient  rate  to  attract  new 
capital  and  stimulate  enterprise.  It  is  surely  not  be- 
yond the  capacity  of  language  to  define  -with  clarity 
what  items  enter  into  the  cost  of  a  product.  The  prod- 
uct which  railroads  are  selling  is  transportation  of  pas- 
sengers and  goods.  The  price  of  the  product  is  the 
rate. 

Of  course,  I  realize  that  the  satisfactory  working  of 
the  method  proposed  is  still  dependent,  to  an  extent, 
on  the  fairness  and  breadth  of  view  of  the  rate-making 
authority,  whether  it  be  the  I.  C.  C.  or  some  newly 
designated  authority,  and  that  it  does  not  provide  a 
self-working  formula.  But  a  self-working  formula  in 
rate-making  is,  I  believe,  a  practical  impossibility. 

At  any  rate,  under  the  proposed  definition  the  rail- 
roads could  appear  before  the  I.  C.  C.  or  regional  com- 
missions, with  a  precise  charter  of  rights,  instead  of, 
as  in  the  past,  having  to  come  as  importunate  beggars, 
throwing  themselves  upon  the  mercy  of  the  Commis- 
sion, with  the  effect  of  undermining  their  own  credit 
by  pleading  and  perhaps  over-pleading  the  dire  need 


THE      RAILROAD     PROBLEM  1  17 

for  higher  rates  and  the  disastrous  consequences  which 
would  follow  if  higher  rates  were  not  granted.  And 
if  the  Commission  disregarded  the  rights  of  the  rail- 
roads to  a  fair  price  for  their  product,  they  could  under 
the  definition  above  suggested  go  to  the  courts  and  ob- 
tain prompt  and  effective  redress,  which  under  the 
vague  terms  of  the  existing  law  is  in  fact  denied  to 
them. 

I  hardly  need  emphasize  that  the  views  I  have  ex- 
pressed do  not  attempt  to  address  themselves  to  a  com- 
plete program  of  railroad  legislation,  but — as  far  as 
they  offer  positive  suggestions — merely  to  the  matter 
•of  assuring  fair  rates  as  against  the  proposal  of  a  Gov- 
ernment guarantee  of  minimum  earnings. 

I  should  like  to  add  that,  whilst  I  believe  the  num- 
ber of  separate  railroad  corporations  could  with  ad- 
vantage be  greatly  diminished  and  the  absorption  of 
the  weaker  lines  by  the  strong  lines  should  in  the  in- 
terest of  good  service  to  the  public  be  facilitated  and 
encouraged,  possibly,  under  proper  safeguards,  even 
compelled,  I  am  opposed  to  the  suggestion  that  the 
number  of  independent  systems  should  be  so  reduced 
as  to  give  the  country  over  to  a  very  few  great  re- 
gional combinations.  My  antagonism  to  this  pro- 
posal rests  on  the  ground  that  I  believe  it  would  di- 
minish competition  to  the  vanishing  point  and  soon 
lead  to  Government  operation  in  fact,  if  not  in  name. 

The  open-minded  spirit  and  the  conscientious  and 
painstaking  manner  in  which  the  Senate  Committee  is 
conducting  the  hearings  on  this  subject  are  wholly  ad- 
mirable. In  their  attitude  toward  the  problem  the 
members  of  the  Committee  are,  I  believe,  correctly  rep- 


Il8  BUSINESS      AND      ECONOMICS 

resenting  the  temper  of  the  public  which  never,  in  my 
recollection,  has  been  so  predisposed  for  a  tranquil  and 
dispassionate  consideration  of  the  complex  and  diffi- 
cult questions  involved.  All  the  more  reason  why 
those  who  by  experience  and  study  are  qualified  to 
contribute  to  the  discussion  of  the  problems,  should  ex- 
press their  true  views  with  complete  frankness  and  not 
make  themselves  sponsors  for  makeshift  compromises. 
To  reconcile  conflicting  views,  to  determine  the  weight 
to  be  attached  to  varying  claims,  is  the  task,  not  of 
the  witness,  but  of  the  legislator. 

It  is  now  possible  to  state  with  approximate  accuracy  what  a 
26  months'  experiment  in  government  operation  of  the  railroads  has 
cost  the  country. 

According  to  figures  presented  to  the  House  of  Representatives  on 
February  21st  by  Mr.  Esch,  Chairman  of  the  House  Committee  on 
Interstate  Commerce,  the  net  excess  of  operating  expenses  and  com- 
pensation to  the  railroads  over  the  operating  revenues  of  all  the 
roads  for  the  entire  period  of  government  operation,  was  $854,000,000. 
The  railroads  under  government  operation  failed  by  that  amount  to 
meet  operating  expenses  and  the  standard  return  (rental)  guaranteed 
by  the  government.  Mr.  Esch  also  stated  that  with  set-offs  on  ac- 
count of  indebtedness  due  the  government  from  the  railroads  for 
additions,  betterments  and  equipment  the  total  amount  which  the 
government  must  appropriate  to  make  up  for  the  deficit  and  which 
must  be  made  good  by  the  taxpayers  is  $636,000,000. 

"In  short,"  said  Mr.  Esch,  "the  government  as  a  result  of  our 
experience  under  Federal  control  will  have  appropriated  $1,900,- 
000,000  and  over.  Of  that  sum  $1,250,000,000  represents  what  already 
has  been  appropriated.  The  difference  would  approximately  be 
what  I  have  already  stated  as  the  amount  the  government  must 
appropriate.  This  additional  sum  of  $636,000,000  will  practically 
have  to  be  charged  off  as  a  war  cost." 

What  the  indirect  loss  has  been  to  the  railroads  and  to  the  public, 
and  how  long  ft  will  take  the  railroads  to  overcome  the  effects  of 
government  operation  no  man  can  now  estimate. 

On  the  other  hand,  the  total  wage  increase  granted  by  the  govern- 
ment during  the  period  in  which  it  was  in  control  of  the  railroads 
amounts  to  well  over  one  billion  dollars.  According  to  figures  com- 
piled by  the  Interstate  Commerce  Commission  and  presented  to  the 
Senate  on  December  26th  the  increases  in  wages  applied  to  the  num- 
ber of  employees  and  the  hours  or  days  worked  as  of  July,  1919, 
amounted  to  $1,774,800,000,  or  97  per  cent  of  the  revenue  from  in- 
creased rates  applied  to  traffic  moved  up  to  July  31st,  1919. 

March,  1920. 


HIGH  FINANCE 


T 

A  HE  term  "high  finance"  derives  its  origin  from 
the  French  "haute  finance,"  which  in  France  as  else- 
where in  Europe  designates  the  most  eminently  re- 
spectable, the  most  unqualifiedly  trustworthy  among 
financial  houses  and  institutions. 

Why  has  that  term,  in  becoming  acclimated  in  this 
country,  gradually  come  to  suggest  a  rather  different 
meaning? 

Why  does  there  exist  in  the  United  States,  to  a  de- 
gree unknown  elsewhere,  a  widespread  attitude  of 
suspicion,  indeed  in  many  quarters,  of  hostility,  toward 
the  financial  community  and  especially  toward  the 
financial  activities  which  focus  in  New  York,  the  coun- 
try's financial  capital1? 

There  are  several  causes  and  for  some  of  them  finance 
cannot  be  absolved  from  responsibility.  But  the  pri- 
mary underlying  and  continuing  cause  is  lack  of  clear 
appreciation  of  what  finance  means  and  stands  for  and 
is  needed  for.  And  from  this  there  has  sprung  a 
veritable  host  of  misconceptions,  prejudices,  supersti- 
tions and  catch-phrases. 

Never  was  it  of  more  importance  than  in  the  pres- 

An  address  delivered  at  the  Annual  Dinner  of  the  American  News- 
paper Publishers'  Association,   New  York,  April  27,   1916. 

119 


120  BUSINESS     AND     ECONOMICS 

ent  emergency  that  the  people  should  have  a  clear 
and  correct  understanding  of  the  meaning  and  sig- 
nificance of  finance,  indeed  of  "high  finance,"  and  that 
they  should  approach  the  subject  calmly  and  dispas- 
sionately and  with  untroubled  vision,  for  when  the  Eu- 
ropean war  is  over  and  the  period  of  reconstruction 
sets  in,  one  of  the  most  pressing  questions  of  the  day 
will  be  that  of  finance  and  financing. 

The  handling  and  adjustment  of  that  question,  al- 
though it  primarily  concerns  Europe,  cannot  fail  to 
affect  America  favorably  or  unfavorably,  according  to 
the  wisdom  or  lack  of  wisdom  of  our  own  attitude 
and  actions. 

A  great  many  things  are  being  and  have  been 
charged  in  the  popular  view  against  finance,  with 
which  finance,  properly  understood,  has  nothing  to  do. 

The  possession  of  wealth  does  not  make  a  man  a 
financier  any  more  than  the  possession  of  a  chest  of 
tools  makes  a  man  a  carpenter. 

Finance  does  not  mean  speculation — although  spec- 
ulation when  it  does  not  degenerate  into  mere  gam- 
bling has  a  proper  and  legitimate  place  in  the  scheme 
of  things  economic.  Finance  most  emphatically  does 
not  mean  fleecing  the  public,  nor  fattening  parasit- 
ically  on  the  industry  and  commerce  of  the  country. 

Finance  cannot  properly  be  held  responsible  for  the 
exploits,  good,  bad  or  indifferent,  of  the  man  who,  hav- 
ing made  money  at  manufacturing,  or  mining,  or  in 
other  pursuits,  blows  into  town,  either  physically  or 
by  telephone  or  telegraph,  and  goes  on  a  financial  spree, 
more  or  less  prolonged. 


HIGH      FINANCE  121 

Finance  means  constructive  work.  It  means  mobil- 
izing and  organizing  the  wealth  of  the  country  so  that 
the  scattered  monetary  resources  of  the  individuals  may 
be  united  and  guided  into  a  mighty  current  of  fruit- 
ful co-operation — a  thousandfold  more  potent  than 
they  would  or  could  be  in  individual  hands. 

Finance  means  promoting  and  facilitating  the  coun- 
try's trade  at  home  and  abroad,  creating  new  wealth, 
making  new  jobs  for  workmen.  It  means  continuous 
study  of  the  conditions  prevailing  throughout  the 
world.  It  means  daring  and  imagination  combined 
with  care  and  foresight  and  integrity,  and  hard,  wear- 
ing work — much  of  it  not  compensated,  because  of 
every  ten  propositions  submitted  to  the  scrutiny  or 
evolved  by  the  brain  of  the  financier  who  is  duly  care- 
ful of  his  reputation  and  conscious  of  his  responsibil- 
ity to  the  public,  it  is  safe  to  say  that  not  more  than 
three  materialize. 

For  the  financial  offspring  of  which  he  acknowledges 
parentage,  or  merely  godfathership,  he  is  held  respon- 
sible by  the  public  for  better  or  for  worse,  and  will 
continue  to  be  held  responsible  notwithstanding  cer- 
tain ill-advised  provisions  of  the  recently  enacted  Clay- 
ton Anti-Trust  Act,  which  are  bound  to  make  it  more 
difficult  for  him  to  discharge  that  responsibility. 

Among  other  functions  and  duties,  it  is  "up  to  him" 
to  look  ahead,  so  that  such  offspring  may  always  be 
provided  with  nouriture,  i.  e.,  with  funds  to  conduct 
their  business.  If  for  one  reason  or  another  they  find 
themselves  short  of  means  in  difficult  times,  it  is  his 
task  and  care  to  find  wavs  and  means  to  obtain  what 


122  BUSINESS      AND      ECONOMICS 

is  needed,  sometimes  at  great  financial  risk  to  himself. 
It  is  perhaps  significant  that  almost  all  the  railroad 
companies  now  in  receivers'  hands  were  among  those 
for  whose  financial  policy  none  of  the  leading  banking 
houses  had  a  continuous  and  recognized  responsibility, 
though  I  must  not  be  understood  as  meaning  to  sug- 
gest that  there  were  not  other  contributory  causes  for 
such  receiverships,  involving  responsibility  and  blame, 
among  others,  also  on  members  of  the  banking  fra- 
ternity. 

II 

Without  going  into  shades  of  encyclopedic  mean- 
ing, I  would  define,  for  the  purpose  of  this  discussion, 
a  financier  as  a  man  who  has  some  recognized  relation 
and  responsibility  toward  the  larger  monetary  affairs 
of  the  public,  either  by  administering  deposits  and 
loaning  funds  or  by  being  a  wholesale  or  retail  dis- 
tributor of  securities. 

To  all  such  the  confidence  of  the  financial  commun- 
ity, which  naturally  knows  them  best,  and  of  the  in- 
vesting public  is  absolutely  vital.  Without  it,  they 
simply  cannot  live. 

To  provide  for  the  thousands  of  millions  of  dollars 
annually  needed  by  our  railroads  and  other  industries 
would  vastly  overtax  the  resources  of  all  the  greatest 
financial  houses  and  groups  taken  together,  and  there- 
fore the  financier  or  group  of  financiers  undertaking 
such  transactions  must  depend  in  the  first  instance  upon 
the  co-operation  of  the  financial  community  at  large. 
For  this  purpose  such  houses  or  groups  associate  with 


HIGH      FINANCE  123 

themselves  for  every  transaction  of  considerable  size, 
a  large  number  of  other  houses,  thus  forming  so-called 
syndicates. 

But  even  the  resources  thus  combined  of  the  entire 
financial  community  would  fall  far  short  of  being  suf- 
ficient to  supply  the  needed  funds  for  more  than  a  very 
limited  time,  and  appeal  must  therefore  be  made  to  the 
absorbing  power  of  the  country  as  a  whole,  represented 
by  the  ultimate  investor. 

Now,  let  a  financial  house,  either  through  lack  of  a 
high  standard  of  integrity  in  dealing  with  the  public,  or 
through  want  of  thoroughness  and  care,  or  through  bad 
judgment,  forfeit  the  confidence  of  its  neighbors  or  of 
the  investing  public,  and  the  very  roots  of  its  being  are 
cut. 

I  do  not  mean  to  claim  that  high  finance  has  not  in 
some  instances  strayed  from  the  true  standard,  that  it 
has  not  made  mistakes,  that  it  has  not  at  times  yielded 
to  temptation — and  the  temptations  which  beset  its 
path  are  indeed  many, — that  there  have  not  been  some 
occurrences  which  every  right  thinking  man  must  de- 
plore and  condemn. 

But  I  do  say  that  practically  all  such  instances  have 
occurred  during  what  may  be  termed  the  country's  in- 
dustrial and  economic  pioneer  period ;  a  period  of  vast 
and  unparalleled  concentration  of  national  energy  and 
effort  upon  material  achievement,  of  tremendous  and 
turbulent  surging  toward  tangible  accomplishment,  of 
sheer  individualism ;  a  period  of  lax  enforcement  of  the 
laws  by  those  in  authority,  of  uncertainty  regarding 
the  meaning  of  the  statutes  relating  to  business  and, 


124  BUSINESS      AND      ECONOMICS 

consequently,  of  impatience  at  restraint  and  of  a  weak- 
ened sense  of  the  fear,  respect  and  obedience  due  to 
the  law. 

In  the  mighty  and  blinding  rush  of  that  whirlwind 
of  enterprise  and  achievement  things  were  done — gen- 
erally without  any  attempt  at  concealment,  in  the  open 
light  of  day  for  every  one  to  behold — which  would  not 
accord  with  our  present  ethical  and  legal  standards; 
and  public  opinion  permitted  them  to  be  done. 

Then  suddenly  a  mirror  was  held  up  by  a  force  suf- 
ficiently powerful  to  cause  the  mad  race  to  halt  for  a 
moment  and  to  compel  the  concentrated  attention  of  all 
the  people.  And  that  mirror  clearly  showed,  perhaps 
it  even  magnified,  the  blemishes  on  that  which  it  re- 
flected. With  their  recognition  came  stern  insistence 
upon  change,  and  very  quickly  the  realization  of  that 
demand. 

And  I  hold  that  finance  has  been  as  quick  and  willing 
as  any  other  element  in  the  community  to  discern  the 
moral  obligations  of  the  new  era  brought  about  within 
the  last  ten  years  and  to  align  itself  on  their  side. 

As  soon  as  the  meaning  of  the  laws  under  which  busi- 
ness was  to  be  conducted  had  come  to  be  reasonably 
defined,  as  soon  as  it  became  apparent  that  the  latitude 
tacitly  permitted  during  the  pioneer  period  must  end, 
finance  fell  into  line  with  the  new  spirit  and  has  kept 
in  line. 

I  say  this  notwithstanding  the  various  investigations 
that  have  since  taken  place,  nearly  all  of  which  have 
dealt  with  incidents  that  occurred  several  years  ago. 
And  I  would  add  that  it  is  difficult  to  imagine  anything 


HIGH      FINANCE  \2$ 

more  unfair  than  the  theory  and  method  of  these  in- 
vestigations as  all  too  frequently  conducted. 

The  appeal  all  too  often  is  to  the  gallery,  hungry  for 
sensation. 

To  innocent  transactions  it  is  sought  to  give  a  sin- 
ister meaning.  To  such  lapses,  faults  or  wrongs  as  may 
be  discovered  are  attributed  exaggerated  portent  and 
significance. 

The  Chairman  is  out  to  make  a  record,  or  to  fortify 
a  preconceived  notion  or  accomplish  a  preconceived 
purpose.  Counsel  is  out  to  make  a  record.  The  prin- 
cipal witnesses  are  placed  in  the  position  of  defendants 
at  the  bar  without  being  protected  by  any  of  the  safe- 
guards which  are  thrown  around  defendants  in  a  court 
of  law. 

To  complete  the  picture,  I  must  add — saving  your 
presence — this  other  patch  of  black:  The  reporting  is 
very  frequently,  if  not  usually,  done  by  young  men  not 
very  familiar  with  matters  of  finance,  and  in  search  of 
incident  and  of  high  light  rather  than  of  the  neutral 
tints  of  a  sober  and  even  record.  And  the  job  of 
head-lining  seems  somehow  to  be  entrusted  generally 
to  one  selected  with  great  care  for  his  ingenuity  in  com- 
pressing the  maximum  of  poison  gases  into  a  few  ex- 
plosive words. 

It  may  all  be  in  accordance  with  the  rules  of  the 
game  of  politics,  but  it  is  not  justice,  and  what  of 
benefit  is  accomplished  could  equally  well  be  obtained, 
whatever  of  guilt  is  to  be  revealed  could  equally  well 
and  probably  better  be  disclosed,  without  resorting  to 
inflammatory  appeal  and  without,  by  assault  or  innu- 


126  BUSINESS     AND      ECONOMICS 

endo,  recklessly  and  often  indiscriminately  besmirch- 
ing reputations  and  hurting  before  the  whole  world  the 
good  name  of  American  business.  I  do  not  know  of 
any  similar  method  and  practice  and  spirit  of  conduct- 
ing investigations  in  any  other  country. 

By  all  means  let  us  delve  deep  wherever  we  have 
reason  to  suspect  that  guilt  lies  buried.  Let  us  take 
short  cuts  to  arrive  at  the  truth,  but  let  us  be  sure  that 
it  is  the  truth  that  we  shall  meet  at  the  end  of  our  road, 
and  not  a  mongrel  thing,  wearing  some  indeed  of  the 
garments  of  truth,  but  some  others,  too,  belonging  to 
that  trinity  of  unlovely  sisters,  passion,  prejudice  and 
self-seeking. 

Ill 

In  many  ways,  in  many  instances,  wrong  impres- 
sions about  finance  have  been  given  to  the  public,  some- 
times from  ignorance,  sometimes  with  malice  afore- 
thought, sometimes  for  political  purposes. 

The  fact  is  that  the  men  in  charge  of  our  financial 
affairs  are,  and  to  be  successful,  must  be  every  whit  as 
honorable,  as  patriotic,  as  right  thinking,  as  anxious 
for  the  good  opinions  of  their  fellowmen  as  those  in 
other  walks  of  life. 

In  every  time  of  crisis  or  difficulty  in  the  nation's 
history,  from  the  War  of  Independence  to  the  present 
European  War,  financiers  have  given  striking  proof  of 
their  devotion  to  the  public  weal,  and  they  may  be 
depended  upon  to  do  so  whenever  and  howsoever  called 
upon. 

American  finance  has  rendered  immense  services  to 


HIGH      FINANCE  127 

the  country,  and  its  record — considering  especially  the 
gross  faultiness  of  the  laws  under  which  it  had  to  work 
before  the  passage  of  the  Federal  Reserve  Act,  and  in 
some  respects  still  has  to  work — compares  by  no  means 
unfavorably  with  that  of  finance  in  Europe. 

Of  course,  there  is  no  effect  without  a  cause.  It 
would  be  idle  to  deny  that  the  prejudice  against  high 
finance  could  not  have  made  the  headway  it  did  if  the 
conduct  and  spirit  of  a  portion  of  our  rich  men  and 
corporations  had  not  afforded  some  real  ground  for  it. 
And  it  must  be  admitted  that  not  a  few  corporations 
in  the  past  have  not  been  sufficiently  mindful  of  the 
fact  that  their  enjoyment  of  the  rights  and  preroga- 
tives of  natural  persons  presupposes  their  possession 
of  those  qualities  of  conscience,  even  of  sentiment,  and 
of  responsiveness  to  moral  appeal  which  are  normal 
attributes  of  average  humanity.  But  there  has  been 
a  gratifying  recognition  of  this  fact  of  late  years  and 
much  evidence  of  a  steadily  growing  endeavor  to  act 
accordingly. 

Another  cause  for  the  popular  feeling  against  high 
finance  lies  in  the  fact  that  many  of  those  in  conspicu- 
ous positions  have  failed  to  appreciate  and  to  satisfy 
the  just  and  proper  insistence  of  the  public  for  adequate 
information.  The  temptation  to  the  abuse  of  power, 
whether  it  be  of  financial  or  any  other  nature,  is  so 
subtle  and  so  strong  that  the  people  are  rightly  watch- 
ful of  those  to  whom  the  exercise  of  power  is  entrusted. 

By  this  I  do  not  mean  that  the  attitude  of  the  pub- 
lic toward  men  occupying  such  places  should  be  one 
of  suspicion;  on  the  contrary,  the  fact  that  a  man  has 


128  BUSINESS     AND     ECONOMICS 

demonstrated  constructive  ability  and  qualities  of  char- 
acter enabling  him  to  rise  to  leadership  (I  do  not  mean 
mere  capacity  for  money-making,  which,  by  itself,  is 
no  proof  of  qualities  entitling  to  public  respect)  af- 
fords presumptive  evidence  in  his  favor,  in  the  absence 
of  reasons  to  the  contrary. 

Indeed,  nothing  is  more  unfortunate  in  its  effect 
upon  corporation  managers  or  financiers,  or  in  fact  upon 
any  men,  than  the  knowledge  that  they  are  looked  upon 
with  set  suspicion,  and  that  they  are  presupposed  to 
be  acting  from  motives  and  in  a  manner  less  worthy 
than  those  of  the  average  decent  man  of  the  commun- 
ity. Such  a  knowledge  is  apt  to  breed  a  sullen,  defi- 
ant attitude  which  I  have  heard  expressed  sometimes 
in  the  sentiment:  "What's  the  use  of  trying*?  We'll 
be  damned  anyhow." 

And  nothing,  on  the  contrary,  is  so  tonic  in  its  effect 
upon  men's  actions,  so  potent  in  bringing  out  the  best 
of  which  their  nature  is  capable  as  the  knowledge 
that  they  are  supposed  and  expected  to  live  up  to  a  high 
standard.  Meet  a  man  in  a  spirit  of  trust,  put  him  on 
his  honor,  appeal  to  the  best  in  him,  show  him  the  re- 
ward of  public  appreciation  and  confidence  for  proven 
merit — and  the  overwhelming  majority  will  respond 
fully  to  that  appeal. 

And  if  it  does  become  necessary  to  insist  upon  reform 
in  prevailing  practices,  to  impose  new  rules  of  conduct, 
be  temperate,  don't  go  to  extremes.  Whatever  meas- 
ures of  regulation  and  supervision  may  be  shown  to 
be  needful,  wise  and  fair,  in  the  light  of  experience  and 
after  mature   dispassionate   deliberation,   should   cer- 


HIGH     FINANCE  129 

tainly  be  enacted  and  enforced,  but  it  is  neither  just 
nor  effective  of  good  result,  incessantly  to  scold  and 
nag,  to  hamper,  harass  and  threaten.  By  all  means, 
watch  and  insist  that  corporations  and  individuals  so 
conduct  their  affairs  as  to  do  their  full  duty  by  their 
employees  as  well  as  by  the  public;  that  they  obey  the 
law,  that  they  do  not  overstep  the  boundary  lines 
properly  assigned  to  their  functions.  But,  also,  try 
once  in  a  while  the  effect  of  a  word  of  encouragement, 
of  confidence  and  of  merited  approval.  If  you  have 
had  to  reprove  or  punish  them  for  doing  wrong,  give 
them  a  chance  to  demonstrate  that  they  mean  there- 
after to  do  right. 

Black  sheep  are  to  be  found  in  every  walk  of  life, 
but  the  basis  of  our  civilization  remains  nevertheless 
the  belief  that  the  vast  majority  of  mankind  want  to 
do  what  is  just  and  right,  a  belief  amply  justified  by 
experience.  It  is  true,  the  millennium  has  not  yet 
come,  nor  the  time  when  humanity  will  no  longer  re- 
quire to  have  its  virtue  stimulated  by  the  fear  of  the 
law,  but  why  assume,  as  it  seems  no  inconsiderable 
part  of  our  people  do,  that  the  leaders  of  finance  and 
the  heads  of  corporations  are  made  of  different  clay 
from  the  rest  of  humanity,  and,  as  a  body,  are  so  little 
responsive  to  the  force  of  the  fundamental  moralities 
that  they  must  be  ruled  primarily  by  means  of  fear 
and  discipline. 

IV 

We  are  prone  to  exaggerate  and  sensationalize  dis- 
closures of  shortcomings  or  lapses  from  the  straight  and 


130  BUSINESS     AND     ECONOMICS 

narrow  path,  to  draw  general  conclusions  from  single 
incidents  and  to  magnify  them  for  political  purposes 
or  newspaper  effect.  In  contradistinction  to  the  rather 
general  habit  in  Europe,  we  have  the  custom,  on  the 
whole,  I  believe,  a  salutary  one,  of  washing  our  soiled 
linen  very  conspicuously  in  public,  and  we  go  at  it 
with  great  relish  and  zest  and  with  a  profusion  of  soap 
and  water  sometimes  quite  out  of  proportion  to  the 
actual  cleaning  to  be  done. 

I  have  had  experience  of  financial  business  in  all  the 
leading  commercial  centres,  and  I  have  no  hesitation 
in  asserting  that  the  financial  community  of  this  coun- 
try is  second  to  none,  and  superior  to  some,  in  Europe 
in  its  standard  of  honesty  and  honor.  This  is  all  the 
more  to  its  credit,  as  in  Europe  justice  strikes  swiftly 
and  sharply,  while  here  the  law's  delays  and  compli- 
cated machinery  throw  undue  safeguards,  amounting, 
in  certain  ways,  almost  to  a  measure  of  toleration, 
around  the  malefactor,  not  to  mention  the  fact  that  in 
a  country  like  ours,  still  in  the  making,  the  opportuni- 
ties and  temptations  for  certain  forms  of  wrong  doing 
are  naturally  greater  than  in  the  old  established  and 
settled  communities  of  Europe. 

There  has  been  no  gambling  frenzy  in  the  financial 
markets  of  America  within  the  memory  of  this  gen- 
eration equalling  the  recklessness  and  magnitude  of 
England's  South  African  mining  craze  with  its  record 
of  questionable  episodes,  some  of  them  involving  great 
names ;  no  scandal  comparable  to  the  Panama  scandal, 
the  copper  collapse,  the  Cronier  failure,  and  similar 
events  in  France;  no  bank  failure  as  disgraceful  and 


HIGH      FINANCE  131 

ruinous  as  that  of  the  Leipziger  Bank  and  two  or  three 
others  within  the  last  dozen  years  in  Germany.  No 
combination  exists  in  this  country  remotely  approach- 
ing the  monopolistic  control  exercised  by  several  of  the 
so-called  cartels  and  syndicates  of  Europe. 

What  we  must  admit  of  our  business  conditions,  and 
what  frequently  is  the  basis  for  erroneous  and  unchar- 
itable foreign  judgment,  is  a  lack  of  system,  of  steadi- 
ness and  order,  of  definitely  settled  and  universally 
prevailing  standards  (intensified  in  effect,  at  times,  by 
excessive  speculation  and  almost  hysterical  extremes 
of  ups  and  downs),  and  last  but  not  least,  a  lack  of 
clearness,  precision  and  stability  in  the  relations  be- 
tween law  and  business,  in  consequence  of  which  there 
does  not  prevail  among  business  men  here  the  same,  as 
it  were,  automatic  and  self-understood  compliance  with 
the  law,  as  in  Europe. 

We  have  nearly  fifty  different  legislatures,  passing 
laws  on  all  conceivable  subjects  more  or  less  continu- 
ously in  the  different  states.  What  is  permitted  in 
one  state  may  be  a  crime  in  another.  We  have,  in 
addition,  the  federal  law  sometimes  differing  from, 
sometimes  conflicting  with,  sometimes  superseding  the 
various  state  laws.  There  is  a  vast  crop  of  new  laws, 
or  of  changes  in  existing  laws,  each  session,  some  of 
them  hastily  drawn,  hastily  passed,  some  of  them  plac- 
ing under  the  ban  of  the  statutory  law  that  which  the 
moral  sentiment  of  the  average  man  does  not  look  upon 
as  wrong. 

Not  a  few  enactments  at  the  time  they  were  passed 
were  meant  chiefly  for  political  effect  without  the  ex- 


132  BUSINESS     AND      ECONOMICS 

pectation  of  their  ever  being  literally  enforced.  A 
new  man  comes  into  office,  who  very  properly  insists 
that  the  laws  on  the  statute  books  must  be  enforced, 
and  the  business  man  wakes  up  one  fine  morning  to 
see  himself  pilloried  as  a  lawbreaker  on  account  of  acts 
running  counter  to  some  law  which  had  fallen  into  com- 
plete desuetude  because  not  enforced,  which  selfsame 
acts  he  has  been  performing  for  years  with  complete 
openness,  with  entire  impunity,  with  the  full  knowl- 
edge of,  and  without  any  dissent  from,  the  authorities 
and  the  public.  And  over  and  above  all  is  the  Su- 
preme Court,  telling  us,  from  time  to  time,  that  in 
passing  such  and  such  an  enactment  the  legislators  have 
exceeded  their  authority  or  violated  the  constitution; 
or,  again  interpreting  the  meaning,  or  deciding  the 
validity  of  a  law  by  a  vote  of  five  to  four,  or  some  sim- 
ilarly close  margin.  If  the  eminent  jurists  of  the  Su- 
preme Court  thus  demonstrate  the  difficulty  of  always 
gauging  with  certainty  the  scope  and  meaning  of  our 
lawgivers'  handiwork  and  reconciling  it  to  our  funda- 
mental bill  of  rights,  surely  the  business  man  may  be 
excused  if  sometimes  he  fails  to  appreciate  the  intent 
and  purpose  of  legislation,  and  if,  bewildered  and  ex- 
asperated by  an  ever-increasing  mass  of  enactments  and 
minute  regulations,  he  finds  himself,  once  in  a  while,  at 
odds  with  some  statute. 

Let  the  law  be  clear  and  concise,  let  there  be  not  too 
overwhelming  a  profusion  of  legislation,  let  it  be  so 
adapted,  in  conception  and  draftsmanship,  to  the  con- 
ditions to  which  it  is  designed  to  apply,  as  to  be,  if  I 
may  coin  a  word,  obeyable  in  actual  practice,  let  the 


HIGH      FINANCE  133 

authorities  enforce  all  laws — and  the  average  Amer- 
ican business  man  or  corporation  will  obey  without 
hesitation  or  attempt  at  evasion.  The  European  busi- 
ness man,  and  in  this  country,  the  man  who  is  not  in 
active  business,  is  not  confronted  with  these  confusing 
conditions,  and  it  is  utterly  unfair  and  unjust  to  stig- 
matize' the  American  business  man  as  less  law-abiding 
than  his  European  confreres,  or  than  his  American 
neighbor  in  other  walks  of  life. 


One  of  the  reasons  why  finance  so  frequently  has 
been  the  target  for  popular  attack  is  that  it  deals  with 
the  tangible  expression  of  wealth,  and  in  the  popular 
mind  pre-eminently  personifies  wealth,  and  is  widely 
looked  upon  as  an  easy  way  to  acquire  wealth  without 
adequate  service.  I  have  spoken  before  of  the  valu- 
able and  indeed  indispensable  service  which  it  is  the 
function  of  finance  to  perform.  Whether  the  reward 
is  disproportionate,  is  a  question  for  the  discussion  of 
which  we  would  have  to  open  up  a  large  field  of  argu- 
ments and  counterarguments  of  a  somewhat  complex 
nature,  which  time  forbids  on  the  present  occasion.  At 
any  rate,  it  is  a  fact  that  there  are  very  few  financial 
houses  of  great  wealth.  Most  of  the  great  fortunes 
of  the  country,  and  all  of  the  greatest  fortunes,  have 
been  made,  not  in  finance,  but  in  trade,  industries  and 
inventions. 

An  exaggerated  view  prevails  likewise  as  to  the 
power  of  finance. 


134  BUSINESS     AND      ECONOMICS 

It  is  true  there  have  been  men  in  finance  from  time 
to  time,  though  rarely  indeed,  who  did  exercise  exceed- 
ingly great  power,  such  as,  in  our  generation,  the  late 
J.  Pierpont  Morgan  and  Edward  H.  Harriman. 

But  the  power  of  those  men  rested  not  in  their  be- 
ing financiers,  but  in  the  compelling  force  of  their 
unique  personalities.  They  were  born  leaders  of  men 
and  they  would  have  been  acknowledged  leaders  and 
exercised  the  power  of  such  leadership  in  whatever 
walk  of  life  they  might  have  selected  as  theirs. 

The  capacity  of  the  financier  is  dependent  upon  the 
confidence  of  the  financial  community  and  the  invest- 
ing public,  just  as  the  capacity  of  the  banks  is  de- 
pendent upon  the  confidence  of  the  depositing  public. 
Take  away  confidence  and  what  remains  is  only  that 
limited  degree  of  power  or  influence  which  mere  wealth 
may  give. 

Confidence  cannot  be  compelled;  it  cannot  be  be- 
queathed— or,  at  most,  only  to  a  very  limited  extent. 
It  is  and  always  is  bound  to  be  voluntary  and  personal. 

Money,  it  is  true,  can  be  bequeathed,  but  the  power 
of  mere  wealth — to  paraphrase  a  famous  dictum — has 
decreased,  is  decreasing  and  ought  to  be,  and  will  be, 
further  diminished. 

Brains  and  character  cannot  be  bequeathed;  and 
while  the  possession  of  inherited  money  gives  a  man 
certain  advantages — not  without  some  drawbacks — it 
does  not  bestow  upon  him  any  considerable  degree  of 
influence  among  business  men,  let  alone  leadership.  It 
would  be  easy  to  cite  names  of  men  who  inherited 
wealth  and  opportunity  but  who,  for  lack  of  essential 


HIGH      FINANCE  I35 

qualities  of  mind  and  character,  failed  completely  to 
gain  the  trust  and  following  of  the  business  commun- 
ity, and  some  of  whom  have  its  active  distrust  and  are 
utterly  without  its  support.  Indeed,  the  large  major- 
ity of  our  business  leaders  are  not  men  of  great  wealth. 

I  know  of  no  other  centre  where  the  label  counts  for 
less,  where  the  shine  and  potency  of  a  great  name  is 
more  quickly  rubbed  off  if  the  bearer  does  not  prove 
his  mettle,  where  the  acid  test  of  personal  efficiency 
is  more  strictly  applied,  than  in  the  great  mart  of 
American  business.  There  is  no  other  calling  in  which 
the  man  of  worth  is  more  certain  to  come  to  the  top. 
With  insignificant  exceptions,  the  men  at  the  head  of 
big  affairs  are  self-made  men,  having  risen  from  the 
ranks  to  their  present  stations. 

No  one  can  occupy  a  prominent  and  influential  place 
in  the  republic  of  business  unless  he  is  trusted  com- 
pletely by  those  who  observe  him  closest  and  know  him 
best — i.  £\,  his  fellow  business  men.  Brains,  knowl- 
edge, character  and  service  are  the  qualifications  re- 
quired. It  is  too  little  realized  that,  though  not  in 
form,  yet  certainly  in  fact,  the  leaders  of  business  are 
elected  by  the  business  community  at  large,  and  hold 
their  position  subject  to  "recall."  Let  a  man  retro- 
grade, deteriorate,  go  astray,  and  the  business  com- 
munity will  soon  find  it  out  and,  however  high  the 
position  he  may  occupy,  will  exercise  the  "recall"  by 
withdrawing  its  confidence  and  ceasing  to  follow  him. 


I36  BUSINESS     AND      ECONOMICS 

VI 

What,  then,  can  and  should  finance  do  on  its  own 
part  in  order  to  gain  and  preserve  for  itself  that  repute 
and  status  with  the  public  to  which  it  is  entitled,  and 
which  in  the  interest  of  the  country,  as  well  as  itself, 
it  ought  to  have"? 

1.  Conform  to  Public  Opinion 

It  must  not  only  do  right,  but  it  must  also  be  par- 
ticularly careful  concerning  the  appearance  of  its  ac- 
tions. 

Finance  should  "omit  no  word  or  deed"  to  place  it- 
self in  the  right  light  before  the  people. 

It  must  carefully  study  and  in  good  faith  conform 
to  public  opinion. 

2.  Publicity 

One  of  the  characteristics  of  finance  heretofore  has 
been  the  cult  of  silence;  some  of  its  rites  have  been  al- 
most those  of  an  occult  science. 

To  meet  attacks  with  dignified  silence,  to  maintain 
an  austere  demeanor,  to  cultivate  an  etiquette  of  reti- 
cence, has  been  one  of  its  traditions. 

Nothing  could  have  been  more  calculated  to  irritate 
democracy,  which  dislikes  and  suspects  secrecy  and  re- 
sents aloofness. 

And  the  instinct  of  democracy  is  right. 

Men  occupying  conspicuous  and  leading  places  in 
finance,  as  in  every  other  calling  touching  the  people's 
interests,  are  legitimate  objects  for  public  scrutiny  in 
the  exercise  of  their  functions. 


HIGH      FINANCE  137 

Tennyson  wrote  of  the  "fierce  light  that  beats  upon 
a  throne,"  and  the  people  insist,  very  properly  and 
justly,  that  the  same  fierce  light  shall  beat  upon  those 
in  dominant  places  of  finance  and  commerce. 

It  is  for  those  occupying  such  positions  to  show  cause 
why  they  should  be  considered  fit  persons  to  be  en- 
trusted with  them,  the  test  being  not  merely  ability, 
but  just  as  much,  if  not  more,  character,  self-restraint, 
Tair-mindedness  and  due  sense  of  duty  towards  the 
public. 

Finance,  instead  of  avoiding  publicity  in  all  of  its 
aspects,  should  welcome  it  and  seek  it.  Publicity  won't 
hurt  its  dignity.  A  dignity  which  can  be  preserved 
only  by  seclusion,  which  cannot  hold  its  own  in  the 
market  place,  is  neither  merited  nor  worth  having,  nor 
capable  of  being  long  retained. 

We  must  more  and  more  get  out  of  the  seclusion  of 
our  offices,  out  into  the  rough  and  tumble  of  democ- 
racy, out — to  get  to  know  the  people  and  get  known 
by  them. 

Not  to  know  one  another  means  but  too  frequently 
to  misunderstand  one  another,  and  there  is  no  more 
fruitful  source  of  trouble  than  to  misunderstand  one 
another's  kind  and  ways  and  motives. 

3.     Service 

Every  man  who  by  eminent  success  in  commerce  or 
finance  raises  himself  beyond  his  peers  is  in  the  nature 
of  things  more  or  less  of  an  "irritant"  (I  use  the  word 
in  its  technical  meaning)  to  the  community. 

It  behooves  him,  therefore,  to  make  his  position  as 


I38  BUSINESS     AND      ECONOMICS 

little  jarring  as  possible  upon  that  immense  majority 
whose  existence  is  spent  in  the  lowlands  of  life  so  far 
as  material  circumstances  are  concerned. 

It  behooves  him  to  exercise  self-restraint  and  to  make 
ample  allowance  for  the  point  of  view  and  the  feelings 
of  others,  to  be  patient,  helpful,  conciliatory. 

It  behooves  him  to  remember  always  that  many 
other  men  are  working,  and  have  worked  all  their  lives, 
with  probably  as  much  assiduous  application,  as  much 
self-abnegation  as  he,  but  have  not  succeeded  in  rais- 
ing themselves  above  mediocre  stations  in  life,  owing 
to  circumstances  not  of  their  making. 

He  should  beware  of  that  insidious  tendency  of 
wealth  to  chill  and  isolate.  He  should  be  careful  not 
to  let  his  feelings,  aspirations  and  sympathies  become 
hardened  or  narrowed,  lest  he  get  estranged  and  grow 
apart  from  his  fellow  men;  and  with  this  in  view  he 
should  not  only  be  approachable  but  should  seek  and 
welcome  contact  with  the  work-a-day  world  so  as  to 
remain  part  and  parcel  of  it,  and  to  maintain  and  prove 
his  homogeneity  with  and  fellowship  in  it. 

And  he  should  never  forget  that  the  advantages  and 
powers  which  he  enjoys  are  his  on  sufferance,  so  to 
speak,  during  good  behavior.  The  theory  of  their  con- 
ferment rests  on  the  consideration  that  the  community 
wants  the  talents  and  the  work  of  those  gifted  with  the 
creative  and  directive  faculties,  and  grants  liberal  com- 
pensation in  order  to  stimulate  them  to  the  effort  of 
using  their  capacities,  since  it  is  in  the  public  interest 
and  needful  for  the  world's  material  progress  that  such 
capacities  should  be  utilized  to  their  full  extent. 


HIGH      FINANCE  139 

He  should  never  forget  that  the  social  edifice  in 
which  he  occupies  quarters  so  desirable  has  been  erected 
by  human  hands,  the  result  of  infinite  effort,  of  sac- 
rifice and  compromise,  the  aim  being  the  greatest  good 
of  society;  and  that  if  that  aim  is  clearly  shown  to  be 
no  longer  served  by  the  present  structure,  if  the  suc- 
cessful man  arrogates  to  himself  too  large  or  too  choice 
a  part,  if,  selfishly,  he  crowds  out  others,  then,  what 
human  hands  have  built  up  by  the  patient  work  of 
many  centuries,  human  hands  can  pull  down  in  one 
hour  of  passion. 

The  undisturbed  possession  of  the  material  rewards 
now  given  to  success,  because  success  presupposes  serv- 
ice, can  be  perpetuated  only  if  its  beneficiaries  exer- 
cise moderation,  self-restraint,  and  consideration  for 
others  in  the  use  of  their  opportunities,  and  if  their 
ability  is  exerted,  not  merely  for  their  own  advantage, 
but  also  for  the  public  good  and  the  weal  of  their  fel- 
low men. 

4.     Organize 

In  the  political  field,  the  ways  not  only  of  finance 
but  of  business  in  general  have  been  often  unfortunate 
and  oftener  still  ineffective. 

It  is  in  conformity  with  the  nature  of  things  that  the 
average  man  of  business,  responsible  not  only  for  his 
own  affairs,  but  often  trustee  for  the  welfare  of  others, 
should  lean  toward  that  which  has  withstood  the  acid 
test  of  experience  and  should  be  somewhat  diffident 
toward  experiment  and  novel  theory. 

But,  making  full  allowance  for  legitimate  conserva- 


140  BUSINESS     AND     ECONOMICS 

tism,  it  must,  I  believe,  be  admitted  that  business,  and 
especially  the  representatives  of  large  business,  includ- 
ing high  finance,  have  too  often  failed  to  recognize  in 
time  the  need,  and  to  heed  the  call  for  changes  from 
methods  and  conceptions  which  had  become  unsuitable 
to  the  time  and  out  of  keeping  with  rationally  progres- 
sive development;  that  they  have  too  often  permitted 
themselves  to  be  guided  by  a  tendency  toward  unyield- 
ing or  at  any  rate  apparently  unyielding  Bourbonism 
instead  of  giving  timely  and  sympathetic  aid  in  a  con- 
structive way  toward  realizing  just  and  wise  modifica- 
tions of  the  existing  order  of  things. 

And  then,  we  must  concede,  I  fear,  that  business  is 
prone  to  indulge  in  the  futile  and  indeed  harmful  prac- 
tice of  crying  "wolf"  too  easily  and  too  often;  that 
it  is  doing  too  much  ineffectual  "kicking"  when  the 
occasion  calls  for  yielding  or  compromise,  and  not 
enough  effectual  fighting  when  that  is  really  called  for. 

In  fact,  almost  the  only  instance  which  I  can  remem- 
ber of  business  asserting  itself  effectively,  on  a  large 
scale  and  by  a  genuine  effort  for  its  legitimate  inter- 
ests and  its  convictions  was  during  the  McKinley- 
Bryan  campaign  (in  saying  which  I  do  not  mean  to 
endorse  some  of  the  methods  used  in  that  campaign). 

And  yet,  the  latent  political  power  of  business  is 
enormous.  Wisely  organized  for  proper  and  right  pur- 
poses it  would  be  irresistible.  No  political  party  could 
succeed  against  it. 

Objectionable  methods  and  practices  sometimes  re- 
sorted to  in  the  past  by  corporate  interests  in  endeav- 
oring to  influence  legislation  and  public  opinion  have 


HIGH      FINANCE  I4I 

been  abandoned  beyond  resurrection,  either  voluntarily 
or  under  the  compulsion  of  law. 

It  is  only  fair  that  with  them  should  be  abandoned 
the  habit  of  politicians,  sometimes  politicians  in  very 
high  places,  to  denounce  as  "lobbying"  every  organized 
effort  of  business  men  to  oppose  tendencies  and  propo- 
sitions of  legislation  deemed  by  them  inimical  to  the 
true  interests  both  of  legitimate  business  and  of  the 
country. 

It  is  only  fair  that  there  should  be  abandoned  the 
habit  of  sneering  at,  decrying  and  suspecting  organ- 
ized efforts  by  business  men  to  educate  public  opinion 
on  questions  affecting  commerce  and  finance,  as  im- 
proper attempts  to  "manufacture"  or  "accelerate"  pub- 
lic opinion. 

On  the  contrary,  unless  there  be  reason  to  suspect 
unworthy  or  illegitimate  motives  or  purposes,  such 
efforts  ought  to  be  encouraged  and  recognized  as  being 
in  the  public  interest. 

VII 

While  welcoming  fair  criticism,  willingly  conceding 
such  measures  as  may  be  found  to  make  for  wise  im- 
provement and  wholeheartedly  co-operating  with  the 
administrative  and  legislative  powers  in  carrying  them 
into  effect,  the  time  has  come  for  men  of  business  in 
general  and  of  finance  in  particular,  to  turn  upon  those 
who  make  of  the  browbeating,  maligning  and  harassing 
of  business  their  politico-professional  stock-in-trade. 

Among  the  powers  for  which  such  men,  indeed  all 


142  BUSINESS     AND     ECONOMICS 

men,  in  political  life,  have  a  wholesome  respect,  one  of 
the  most  efficacious  is  organization. 

Let  business  then  become  militant  and  organize,  not 
to  secure  special  privileges — it  does  not  want  any  and 
does  not  need  any — but  to  secure  due  regard  for  its 
views  and  its  rights  and  its  conceptions  as  to  what 
measures  will  serve  the  best  interests  of  the  country, 
and  what  measures  will  harm  and  jeopardize  such  in- 
terests. 

Without  wishing  to  hold  up  the  labor  unions  as 
offering  a  complete  model  for  the  spirit  which  should 
actuate  us  or  the  methods  we  should  follow — because 
their  class-consciousness  and  the  resulting  conduct  are 
sometimes  extreme  and  accordingly  shortsighted — I 
would  urge  upon  business  men  to  cultivate  and  demon- 
strate but  a  little  of  that  cohesion  and  discipline  and 
subordination  of  self  in  the  furtherance  of  the  com- 
mon cause,  that  readiness  to  back  up  their  spokesmen, 
that  loyalty  to  their  calling  and  to  one  another  which 
workingmen  practice  and  demonstrate  daily,  and 
which  have  secured  for  their  representatives  the  respect 
and  fear  of  political  parties. 

Let  business  men  range  themselves  behind  their 
spokesmen,  such  as  the  Chambers  of  Commerce  and 
kindred  associations  in  states  and  cities.  Let  them 
get  together  now  and  in  the  future  through  a  prop- 
erly constituted  permanent  organization,  and  guided 
by  practical  knowledge,  broad  vision  and  patriotism, 
agree  upon  the  essentials  of  legislation  affecting  affairs, 
which  the  situation  calls  for  from  time  to  time. 

Let  them  pledge  themselves  to  use  their  legitimate 


HIGH      FINANCE  143 

influence  and  their  votes  to  realize  such  legislation  and 
to  oppose  actively  what  they  believe  to  be  harmful  law- 
making. 

Let  them  strive,  patiently  and  persistently,  to  gain 
the  confidence  of  the  people  for  their  methods  and 
their  aims. 

Let  them  meet  false  or  irresponsible  or  ignorant  as- 
sertion with  plain  and  truthful  explanation.  Let  them 
take  their  case  directly  to  the  people — as  the  railroads 
have  been  doing  of  late  with  very  encouraging  results 
— and  inaugurate  a  campaign  of  education  in  sound 
economics,  sound  finance  and  sound  national  business 
principles. 

Let  business  men  do  these  things,  not  sporadically, 
under  the  spur  of  some  imminent  menace,  but  system- 
atically and  persistently. 

Let  them  be  mindful  that  just  as  the  price  of  liberty 
is  eternal  vigilance,  so  eternal  effort  in  resisting  fal- 
lacies and  in  disseminating  true  and  tested  doctrine  is 
the  price  of  right  lawmaking  in  a  democracy. 


THE 

NEW  YORK  STOCK  EXCHANGE 

AND  PUBLIC  OPINION 


A 


FEW  weeks  ago  I  went  to  Washington  to  con- 
tradict, as  a  voluntary  witness  before  a  Committee  of 
Congress,  under  the  solemn  obligation  of  my  oath,  a 
gross  and  wanton  calumny  which,  based  upon  nothing 
but  anonymous  and  irresponsible  gossip,  had  been  ut- 
tered regarding  my  name. 

On  my  way  between  New  York  and  Washington, 
thinking  that,  once  on  the  stand,  I  might  possibly  be 
asked  a  number  of  questions  more  or  less  within  the 
general  scope  of  the  Committee's  enquiry,  I  indulged 
in  a  little  mental  exercise  by  putting  myself  through 
an  imaginary  examination. 

With  your  permission,  I  will  state  a  few  of  these 
phantom  questions  and  answers: 

should  the  exchange  be  "regulated*?" 

Question  : 

There  is  a  fairly  widespread  impression  that  the  func- 
tions of  the  Stock  Exchange  should  be  circumscribed 
and  controlled  by  some  governmental  authority;  that  it 

Remarks   at   the   Annual    Dinner   of   the   Association   of   Stock   Ex- 
change Brokers,  New  York,  January  24,   1917. 

144 


NEW     YORK      STOCK      EXCHANGE       I45 

needs  reforming  from  without.     What  have  you  to  say 
on  that  subject? 

Answer: 

I  need  not  point  out  to  your  Committee  the  neces- 
sity of  differentiating  between  the  Stock  Exchange  as 
such  and  those  who  use  the  Stock  Exchange. 

Most  of  the  complaints  against  the  Stock  Exchange 
arise  from  the  action  of  those  outside  of  its  organ- 
ization and  over  whose  conduct  it  has  no  control.  At 
times,  no  doubt,  there  have  been  shortcomings  and  lax- 
ity of  methods  in  the  administration  of  the  Stock  Ex- 
change just  as  there  have  been  in  every  other  institu- 
tion administered  by  human  hands  and  brains.  Some 
things  were,  if  not  approved,  at  least  tolerated  in  the 
past  which  are  not  in  accord  with  the  ethical  concep- 
tion of  to-day. 

The  same  thing  can  be  said  of  almost  every  other 
institution,  even  of  Congress.  Until  a  few  years  ago, 
for  instance,  the  acceptance  of  campaign  contributions 
from  corporations,  the  acceptance  of  railroad  passes  by 
Congressmen  and  Senators  were  regular  practices  which 
did  not  shock  the  conscience  either  of  the  recipients  or 
of  the  public.  Now  they  are  no  longer  tolerated  by 
public  opinion,  and  have  rightly  been  made  illegal. 

Ethical  conceptions  change;  the  limits  of  what  is 
morally  permissible  are  drawn  tighter.  That  is  the 
normal  process  by  which  civilization  moves  forward. 

The  Stock  Exchange  never  has  sought  to  resist  the 
coming  of  that  more  exacting  standard.  On  the  con- 
trary, in  its  own  sphere  it  has  ever  aimed  to  advance 


I46  BUSINESS      AND     ECONOMICS 

the  standard,  and  it  has  shown  itself  ready  and  willing 
to  introduce  better  methods  whenever  experience 
showed  them  to  be  wise  or  suggestion  showed  them  to 
be  called  for. 

In  its  requirements  for  admission  of  securities  to 
quotation,  in  the  publicity  of  its  dealings,  in  the  sol- 
vency of  its  members,  in  its  rules  regulating  their  con- 
duct and  the  enforcement  of  such  rules,  the  New  York 
Stock  Exchange  is  at  least  on  a  par  with  any  other 
Stock  Exchange  in  the  world,  and,  in  fact,  more  ad- 
vanced than  almost  any  other. 

The  outside  market  "on  the  curb"  could  not  exist  if 
it  were  not  for  the  stringency  of  the  requirements  in 
the  interest  of  the  public,  which  the  Stock  Exchange  im- 
poses in  respect  of  the  admission  of  securities  to  trad- 
ing within  its  walls  and  jurisdiction. 

There  is  no  other  Stock  Exchange  in  existence  in 
which  the  public  has  that  control  over  the  execution  of 
orders,  which  is  given  to  it  by  the  practice — unique  to 
the  New  York  Stock  Exchange — of  having  every  sin- 
gle transaction  immediately  recorded  when  made  and 
publicly  announced  on  the  ticker  and  on  the  daily  trans- 
action sheet. 

I  am  familiar  with  the  Stock  Exchanges  of  London, 
Berlin  and  Paris,  and  I  have  no  hesitation  in  saying 
that,  on  the  whole,  the  New  York  Stock  Exchange  is 
the  most  efficient  and  best  conducted  organization  of 
its  kind  in  the  world. 

The  recommendations  made  by  the  Commission  ap- 
pointed by  Governor  Hughes  some  time  ago  were  im- 
mediately  adopted   in   toto  by   the   Stock   Exchange. 


NEW     YORK     STOCK     EXCHANGE       I47 

Certain  abuses  which  were  shown  to  have  crept  into  its 
system  several  years  ago  were  at  once  rectified.  From 
time  to  time  other  failings  will  become  apparent  (there 
may  be  some  in  existence  at  this  very  moment  which 
have  escaped  its  attention)  as  failings  become  appar- 
ent in  every  institution,  and  will  have  to  be  met  and 
corrected. 

I  am  satisfied  that  in  cases  where  public  opinion  or 
the  proper  authorities  call  attention  to  shortcomings 
which  may  be  found  to  exist  in  the  Stock  Exchange 
practice,  or  where  such  may  be  discovered  by  the  gov- 
erning body  or  the  membership  of  the  Exchange, 
prompt  correction  can  be  safely  relied  upon. 

Sometimes  and  in  some  respects,  it  is  true,  outside 
observers  may  have  a  clearer  vision  than  those  who  are 
qualified  by  many  years  of  experience,  practice  and 
routine. 

If  there  be  any  measures  which  can  be  shown  clearly 
to  be  conducive  toward  the  better  fulfilment  of  those 
purposes  which  the  Stock  Exchange  is  created  and  in- 
tended to  serve,  I  am  certain  that  the  membership 
would  not  permit  themselves  to  be  led  or  influenced  by 
hide-bound  Bourbonism,  but  would  welcome  such  meas- 
ures, from  whatever  quarter  they  may  originate. 

is  the  exchange  merely  a  private  institution? 

Question  : 

Do  I  understand  you  to  mean,  then,  that  the  Stock 
Exchange  is  simply  a  private  institution  and  as  such  re- 
moved from  the  control  of  governmental  authorities 
and  of  no  concern  to  them? 


i48       business    and    economics 

Answer: 

I  beg  your  pardon,  but  that  is  not  the  meaning  I 
intended  to  convey.  While  the  Stock  Exchange  is  in 
theory  a  private  institution,  it  fulfils  in  fact  a  public 
function  of  great  national  importance.  That  function 
is  to  afford  a  free  and  fair,  broad  and  genuine  market 
for  securities  and  particularly  for  the  tokens  of  the  in- 
dustrial wealth  and  enterprise  of  the  country,  i.  e., 
stocks  and  bonds  of  corporations. 

Without  such  a  market,  without  such  a  trading  and 
distributing  centre,  wide  and  active  and  enterprising, 
corporate  activity  could  not  exist. 

If  the  Stock  Exchange  were  ever  to  grow  unmind- 
ful of  the  public  character  of  its  functions  and  of  its 
national  duty,  if  through  inefficiency  or  for  any  other 
reason  it  should  ever  become  inadequate  or  untrust- 
worthy to  render  to  the  country  the  services  which  con- 
stitute its  raison  d'etre,  it  would  not  only  be  the  right, 
but  the  duty  of  the  authorities,  State  or  Federal,  to 
step  in. 

But  thus  far,  I  fail  to  know  of  any  valid  reasons  to 
make  such  action  called  for. 

short  selling is  it  justifiable*? 

Question: 

You  have  com?nenced  your  first  answer  with  the 
words,  "I  need  not  point  out  to  your  Committee.'" 
That  is  a  complimentary  assumption,  but  I  don't  mind 
telling  you  that  we  here  are  very  little  acquainted  with 
the  working  of  the  Stock  Exchange  or  the  affairs  of  you 
Wall  Street  men  in  general.  What  about  short  selling? 


new    york    stock    exchange     i49 

Answer: 

I  do  not  mean  to  take  a  "holier  than  thou"  attitude, 
but  personally,  I  never  have  sold  a  share  of  stock  short. 
Short  sellers  are  born,  not  made.  But  if  there  were 
not  people  born  who  sell  short,  they  would  almost  have 
to  be  invented. 

Short  selling  has  a  legitimate  place  in  the  scheme  of 
things  economic.  It  acts  as  a  check  on  undue  optimism, 
it  tends  to  counteract  the  danger  of  an  upward  run- 
away market,  it  supplies  a  sustaining  force  in  a  heavily 
declining  market  at  times  of  unexpected  shock  or  panic. 
It  is  a  valuable  element  in  preventing  extremes  of  ad- 
vance and  decline. 

The  short  seller  contracts  to  deliver  at  a  certain  price 
a  certain  quantity  of  stocks  which  he  does  not  own  at 
the  time,  but  which  he  expects  the  course  of  the  mar- 
ket to  permit  him  to  buy  at  a  profit.  In  its  essence  that 
is  not  very  different  from  what  every  contractor  and 
merchant  does  when  in  the  usual  course  of  business  he 
undertakes  to  complete  a  job  or  to  deliver  goods  with- 
out having  first  secured  all  of  the  materials  entering 
into  the  work  or  the  merchandise. 

The  practice  of  short  selling  has  been  sanctioned  by 
economists  from  the  first  Napoleon's  Minister  of 
Finance  to  Horace  White  in  our  day.  While  at  vari- 
ous times  laws  have  been  enacted  to  prohibit  that  op- 
eration, it  is  a  noteworthy  fact  that  in  every  instance 
I  know  of,  these  laws  have  been  repealed  after  a  short 
experience  of  their  effects. 

I  am  informed  on  good  authority — though  I  cannot 
personally  vouch  for  the  correctness  of  the  information 


150  BUSINESS     AND     ECONOMICS 

— that  there  is  no  short  selling  on  one  nowadays  fairly 
important  Stock  Exchange,  that  of  Tokyo,  Japan. 
You  will  have  seen  in  the  papers  that  when  President 
Wilson's  peace  message  (or  was  it  the  German  Chan- 
cellor's peace  speech?)  became  known  in  Tokyo,  the 
Stock  Exchange  there  was  thrown  into  a  panic  of  such 
violence  that  it  had  to  close  its  doors.  It  attempted 
to  reopen  a  few  days  later,  but  after  a  short  while  of 
trading  was  again  compelled  to  suspend. 

Assuming  my  information  to  be  correct,  we  observe 
here  an  illuminating  instance  of  cause  and  effect. 

Short  selling  does  become  a  wrong  when  and  to  the 
extent  that  the  methods  and  intent  of  the  short  seller 
are  wrong.  The  short  seller  who  goes  about  like  a 
raging  lion  (or  "bear")  seeking  whom  he  may  devour; 
he  who  deliberately  smashes  values  by  dint  of  manipu- 
lation or  artificially  intensified  selling  amounting  in 
effect  to  manipulation,  or  by  causing  alarm  through 
spreading  untrue  reports  or  unverified  rumors  of  a  dis- 
turbing character,  does  wrong  and  ought  to  be  pun- 
ished. 

Perhaps  the  Stock  Exchange  authorities  are  not  al- 
ways alert  enough  and  thorough  enough  in  running 
down  and  punishing  deliberate  wreckers  of  values  and 
spreaders  of  evil  omen.  Perhaps  there  is  not  enough 
energy  and  determination  in. dealing  with  the  grave  and 
dangerous  evil  of  rumor  mongering  on  the.  Stock  Ex- 
change and  in  brokers'  offices.  I  need  hardly  add  that 
the  practices  to  which  I  have  referred  are  quite  as  wrong 
and  punishable  when  they  aim  at  and  are  applied  to 


NEW     YORK     STOCK     EXCHANGE      l^l 

the  artificial  boosting  of  prices  as  when  the  object  is 
the  artificial  depression  of  prices. 

But  after  all,  as  the  present  investigation  shows,  even 
Congress,  with  the  machinery  of  almost  unlimited 
power  at  its  hand,  does  not  always  seem  to  find  it  quite 
easy  to  hunt  the  wicked  rumor-mongers  to  their  lairs 
and  subject  them  to  adequate  punishment.  Yet  the 
unwarranted  assailing  of  a  man's  good  name  is  a  more 
grievous  and  heinous  offence  than  the  assailing,  by  dint 
even  of  false  reports,  of  the  market  prices  of  his  pos- 
sessions. 


DOES  THE   PUBLIC  GET      FLEECED 


>2 


Question: 

We  hear  or  read  from  time  to  time  about  the  public 
being  fleeced.  There  is  a  good  deal  of  smoke.  Isn't 
there  some  fire? 

Answer: 

If  people  do  get  "fleeced,"  the  fault  lies  mainly  with 
outside  promoters  or  unscrupulous  financiers,  over 
whom  the  Stock  Exchange  has  no  effective  control. 
Some  people  imagine  themselves  "fleeced,"  when  the 
real  trouble  was  their  own  "get-rich-quick"  greed  in 
buying  highly  speculative  or  unsound  securities,  or 
having  gone  into  the  market  beyond  their  depth,  or 
when  they  have  exercised  poor  judgment  as  to  the 
time  of  buying  and  selling.  Against  these  causes  I 
know  of  no  effective  remedy,  just  as  there  is  no  way  to 
prevent  a  man  from  overeating  or  eating  what  is  bad 
for  him. 

In  saying  this,  I  do  not  mean  to  imply  that  stock- 


152  BUSINESS     AND     ECONOMICS 

brokers  have  not  a  duty  in  the  premises.  On  the  con- 
trary, they  have  a  very  distinct  and  comprehensive  duty 
toward  their  clients,  especially  those  less  familiar  with 
stock  market  and  financial  affairs,  and  toward  the  pub- 
lic at  large.  And  they  have  furthermore  the  duty  to 
abstain  from  tempting  or  unduly  encouraging  people 
to  speculate  on  margin,  especially  people  of  limited 
means,  and  from  accepting  or  continuing  accounts 
which  are  not  amply  protected  by  margin. 

In  respect  of  the  latter  requirement,  the  Stock  Ex- 
change rightly  increased  the  stringency  of  its  rules  some 
years  ago,  and  it  cannot  too  sternly  set  its  face  against 
an  infringement  of  those  rules  or  too  vigilantly  guard 
against  their  evasion. 

Against  unscrupulous  promotion  and  financiering  a 
remedy  might  be  found  in  a  law  which  should  forbid 
any  public  dealing  in  any  industrial  security  (for  rail- 
road and  public  service  securities  the  existing  commis- 
sions afford  ample  protection  to  the  public)  unless  its 
introduction  is  accompanied  by  a  prospectus  setting 
forth  every  material  detail  about  the  company  con- 
cerned and  the  security  offered,  such  prospectus  to  be 
signed  by  persons  who  are  to  be  held  responsible  at  law 
for  any  willful  omission  or  misstatement  therein. 

Such  a  law  would  be  analogous  in  its  purpose  and 
function  to  the  Pure  Food  Law.  If  it  went  beyond 
that  purpose  and  function  it  would  be  apt  to  overshoot 
the  mark.  The  Pure  Food  Law  does  not  pretend  to 
prescribe  how  much  a  man  should  eat,  when  he  should 
eat  or  what  is  good  or  bad  for  him  to  eat,  but  it  does 
prescribe  that  the  ingredients  of  what  is  sold  to  him  as 


NEW     YORK     STOCK     EXCHANGE       153 

food  must  be  honestly  and  publicly  stated.  The  same 
principle  should  prevail  in  the  matter  of  the  offering 
and  sale  of  securities. 

If  a  drug  contains  water,  the  quantity  or  proportion 
must  be  shown  on  the  label,  so  that  a  man  cannot  sell 
you  a  bottle  filled  with  water  when  you  think  you  are 
buying  a  tonic.  In  the  same  way  the  proportion  of 
water  in  a  stock  issue  should  be  plainly  and  publicly 
shown. 

The  purchaser  should  not  be  permitted  to  be  under 
the  impression  that  he  is  buying  a  share  in  tangible  as- 
sets when,  as  a  matter  of  fact,  he  is  buying  expecta- 
tions, earning  capacity  or  goodwill.  These  may  be, 
and  often  are,  very  valuable  elements,  but  the  pur- 
chaser ought  to  be  enabled  to  judge  as  to  that  with  the 
facts  plainly  and  clearly  before  him. 

The  main  evil  of  watered  stock  lies  not  in  the  pres- 
ence of  water,  but  in  the  concealment  or  coloring  of 
that  liquid.  Notwithstanding  the  unenviable  reputa- 
tion which  the  popular  view  attaches  to  watered  stock, 
there  are  distinctly  two  sides  to  that  question,  always 
provided  that  the  strictest  and  fullest  publicity  is  given 
to  all  pertinent  facts  concerning  the  creation  and  na- 
ture of  the  stock. 

do  "big  men"  put  the  market  up  or  down? 

Question: 

Is  it  not  a  fact  that  some  of  the  "big  men"  get  to- 
gether from  time  to  time  and  determine  to  put  the  mar- 
ket up  or  down  so  as  to  catch  profits  going  and  coming? 


154       business    and    economics 

Answer: 

As  to  "big  men"  meeting  to  determine  the  course  of 
the  stock  market,  that  is  one  of  those  legends  and  super- 
stitions hard  to  kill,  inherited  from  olden  days  many 
years  ago  when  conditions  were  totally  different  from 
what  they  are  now,  and  when  the  scale  of  things  and 
morals,  too,  was  different. 

The  fluctuations  of  the  stock  market  represent  the 
views,  the  judgment  and  the  conditions  of  many  thou- 
sands of  people  all  over  the  country,  and  indeed,  in 
normal  times,  all  over  the  world. 

The  current  which  sends  market  prices  up  or  down  is 
far  stronger  than  any  man  or  combination  of  men.  It 
would  sweep  any  man  or  men  aside  like  driftwood  if 
they  stood  in  its  way  or  attempted  to  deflect  it. 

True,  men  sometimes  discern  the  approach  of  that 
current  from  afar  off  and  back  their  judgment  singly, 
or  a  few  of  them  together,  as  to  its  time  and  effect. 
They  may  hasten  a  little  the  advent  of  that  current, 
they  may  a  little  intensify  its  effect,  but  they  have  not 
the  power  to  either  unloosen'  it  or  stop  it. 

If  by  the  term  "big  men"  you  mean  bankers,  let  me 
add  that  a  genuine  banker  has  very  little  time  and, 
generally  speaking,  equally  little  inclination  to  spec- 
ulate, and  that  his  very  training  and  occupation  unfit 
him  to  be  a  successful  speculator. 

The  banker's  training  is  to  judge  intrinsic  values, 
his  outlook  must  be  broad  and  comprehensive,  his  plans 
must  take  account  of  the  longer  future.  The  specu- 
lator's business  is  to  discern  and  take  advantage  of 
immediate  situations,  his  outlook  is  for  tomorrow,  or 


NEW     YORK     STOCK     EXCHANGE      155 

anyhow  for  the  early  future;  he  must  indeed  be  able 
at  times  to  disregard  intrinsic  values. 

The  temperamental  and  mental  qualifications  of  the 
banker  and  the  speculator  are  fundamentally  conflict- 
ing and  it  hardly  ever  happens  that  these  qualifications 
are  successfully  combined  in  one  and  the  same  person. 
The  banker  as  a  stock  market  factor  is  vastly  and 
strangely  overestimated,  even  by  the  Stock  Exchange, 
fraternity  itself. 

May  I  add  that  a  sharp  line  of  demarcation  exists 
between  the  speculator  and  the  gambler4?  The  former 
has  a  useful  and  probably  a  necessary  function,  the 
latter  is  a  parasite  and  a  nuisance.  He  is  only  toler- 
ated because  no  means  have  been  found  thus  far  to 
abolish  him  without  at  the  same  time  doing  damage  to 
elements  the  preservation  of  which  is  of  greater  im- 
portance than  the  obliteration  of  the  gambler. 


By  this  time  the  Committee  would  surely  feel  that  it 
had  had  a  surfeit  of  my  wisdom,  as  I  am  sure  you  must 
feel,  but  if  you  will  be  indulgent  a  very  little  while 
longer,  I  should  like  to  say  a  few  words  more  to  you 
whose  guest  I  have  the  honor  to  be  this  evening. 

My  recent  observation  of  and  contact  with  Congress- 
men and  others  in  Washington  have  once  more  forti- 
fied my  belief  that  the  men,  by  and  large,  whom  the 
country  sends  to  Washington  to  represent  it,  desire  and 
are  endeavoring,  honestly  and  painstakingly,  to  do  their 
duty  according  to  their  light  and  conscience,  and  that, 
making  reasonable  allowance  for  the  element  of  party 


I56  BUSINESS     AND     ECONOMICS 

considerations,  they  represent  very  fairly  the  views  and 
sentiments  of  the  average  American.  Most  of  them 
are  men  in  moderate  circumstances.  Very  few  of  them 
have  had  occasion  to  familiarize  themselves  with  the 
laws,  the  history  and  the  functionings  of  finance  and 
trade,  to  come  into  relation  with  the  big  business  affairs 
of  the  country,  or  to  compare  views  with  its  active 
business  men. 

It  may  be  assumed  that,  very  naturally,  not  a  few 
of  them  have  failed  to  come  to  a  full  recognition  of 
the  facts  that  the  mighty  pioneer  period  of  America's 
industrial  development  came  definitely  to  an  end  a 
dozen  years  ago;  that  with  it  came  to  an  end  practices 
and  methods  and  ethical  conceptions  which  in  the 
midst  of  the  towering  achievements  of  that  turbulent 
period  of  over-intensive,  over-rapid  development  were, 
if  not  permitted,  yet  to  an  extent  silently  tolerated,  and 
that  business  has  willingly  fallen  into  line  and  kept  in 
line  with  the  reforms  which  were  called  for  in  busi- 
ness as  in  other  walks  of  our  national  life. 

The  opinions  of  the  world,  and  particularly  of  the 
political  world,  travel  along  well  worn  roads.  Men 
are  reluctant  to  go  to  the  effort  of  reconsidering  view- 
points and  conclusions  which,  by  tradition  or  mental 
habit,  have  become  fixed. 

Many  in  and  out  of  Congress  are  still  under  the  con- 
trolling impress  of  the  stormy  years  when  certain  de- 
plorable occurrences  affecting  corporations  and  busi- 
ness men  were  brought  to  light;  when  it  was  demon- 
strated that  certain  abuses  which  had  accumulated  dur- 
ing well  nigh  two  generations  needed  to  be  done  away 


NEW     YORK     STOCK     EXCHANGE       \$"] 

with  for  good  and  all,  and  when  the  people  went 
through  the  ancient  edifice  of  business  with  the  vacuum 
cleaner  of  reform  and  regulation,  using  it  very  thor- 
oughly— perhaps,  in  spots,  a  little  too  thoroughly. 

Not  a  few  politicians  are  still  sounding  the  old  battle 
cry,  although  the  battle  of  the  people  for  the  regula- 
tion and  supervision  of  corporations  was  fought  to  a 
finish  years  ago  and  was  won  by  the  people,  and  al- 
though the  people  themselves  of  late,  On  the  few  occa- 
sions when  a  direct  proposition  has  been  put  up  to  them, 
such  as  recently  in  Missouri,  have  indicated  that  they 
consider  the  punitive  and  probationary  period  at  an 
end  and  want  business  to  have  a  fair  chance  and  a 
square  deal. 

When  the  right  of  suffrage  was  thrown  open  to  the 
masses  of  the  people  in  England,  a  great  Englishman 
said:  "Now  we  must  educate  our  masters."  In  this 
country  it  is  not  so  much  a  question  of  educating  our 
masters,  the  people  and  the  people's  representatives 
(who,  moreover,  would  resent  and  refuse  to  tolerate 
for  a  moment  any  such  patronizing  assumption),  as  of 
getting  them  to  know  us  and  getting  ourselves  to  know 
them. 

All  parties  concerned  will  benefit  from  coming  into 
closer  contact  with  one  another  and  becoming  ac- 
quainted with  one  another's  viewpoints. 

Can  we  honestly  say  that  we  are  doing  our  full  share 
to  bring  about  such  contact  and  to  get  ourselves  and 
what  we  believe  in,  properly  understood;  believe  in, 
not  only  because  it  happens  to  be  our  job  in  life  and 
our  self-interest,  but  because  in  the  general  scheme  of 


I58  BUSINESS      AND      ECONOMICS 

things  it  serves  a  legitimate  and  useful  and  necessary 
function  for  our  country1? 

How  many  of  us  have  taken  the  trouble  to  seek  the 
personal  acquaintance  of  the  Congressmen  or  Assem- 
blymen or  State  Senators  representing  our  respective 
districts'?  How  many  of  us  make  an  effort  to  come 
into  personal  relationship  with  people,  both  here  and 
in  the  West  and  South,  outside  our  accustomed  circles? 
Yet  an  ounce  of  personal  relationship  and  personal  talk 
is  worth  many  pounds  of  speech  making  and  publicity 
propaganda. 

When  you  look  a  man  in  the  face  and  talk  to  him 
and  question  him  and  realize  in  the  end  that  he  is  sin- 
cere in  his  viewpoint,  whether  you  share  it  or  not,  and 
that  he  is  made  of  the  same  human  stuff  as  you,  much 
animosity,  many  preconceived  notions  are  apt  to  van- 
ish, and  you  are  not  so  cocksure  any  longer  that  the 
other  fellow  is  a  destructive  devil  of  radicalism  or  a 
bloated  devil  of  capitalism,  as  the  case  may  be. 

Every  one  of  us,  in  a  greater  or  lesser  degree,  every 
one  in  some  degree  has  the  power  of  co-operating  in  the 
vastly  important  task  of  personal  propaganda  for  a 
better  understanding,  a  more  nearly  just  appreciation  of 
each  other,  between  East  and  West  and  North  and 
South,  between  what  is  termed  Wall  Street  and  the  men 
who  make  our  laws,  between  business  and  the  people. 

This  is  the  age  of  publicity,  whether  we  like  it  or 
not.  Democracy  is  inquisitive  and  won't  take  things 
for  granted.  It  will  not  be  satisfied  with  dignified  si- 
lence, still  less  with  resentful  silence. 

Business  and  business  men  must  come  out  of  their 


NEW     YORK     STOCK      EXCHANGE       1 59 

old  time  seclusion,  they  must  vindicate  their  useful- 
ness, they  must  prove  their  title,  they  must  claim  and 
defend  their  rights  and  stand  up  for  their  convictions. 
Nor  will  business  or  the  dignity  of  business  men  be 
harmed  in  the  process. 

No  healthy  organism  is  hurt  by  exposure  to  the  open 
air. 

Democracy  wants  "to  be  shown."  It  is  no  longer 
sufficient  for  the  successful  man  to  claim  that  he  has 
won  his  place  by  hard  work,  energy,  foresight  and 
integrity. 

Democracy  insists  rightly  that  a  part  of  every  man's 
ability  belongs  to  the  community.  Democracy 
watches  more  and  more  carefully  from  year  to  year 
what  use  is  being  made  of  the  rewards  which  are  be- 
stowed upon  material  success,  and  particularly  whether 
the  power  which  goes  with  success  is  used  wisely  and 
well,  with  due  sense  of  responsibility  and  self-restraint, 
with  due  regard  for  the  interests  of  the  community. 

And  if  the  consensus  of  enlightened  public  opinion 
should  come  to  conclude  that  on  the  whole  it  is  not  so 
used,  the  people  will  find  means  to  limit  those  rewards 
and  to  curtail  that  power.  And  what  is  true  of  the 
public  attitude  toward  individuals  holds  good  equally 
of  its  attitude  toward  organizations  such  as  the  Stock 
Exchange. 

There  can  be  little  doubt  that  a  great  deal  of  misr 
conception  prevails  as  to  the  methods,  spirit  and  prac- 
tices of  the  Stock  Exchange,  as  to  its  functions,  pur- 
poses and  its  place  in  the  country's  economic  structure. 

It  is  of  great  and  urgent  importance  that  the  Stock 


l60  BUSINESS     AND     ECONOMICS 

Exchange  should  leave  nothing  undone  to  get  itself 
better  and  more  correctly  understood.  It  should  not 
only  not  avoid  the  fullest  publicity  and  scrutiny,  but  it 
should  welcome  and  seek  them. 

It  has  nothing  to  hide  and  it  should  be  glad  to  show 
that  it  has  nothing  to  hide.  It  should  miss  no  oppor- 
tunity to  explain  patiently  and  in  good  temper  what 
it  is  and  stands  for,  to  correct  misunderstandings  and 
erroneous  conceptions.  If  it  is  attacked  from  any  quar- 
ter deserving  of  attention,  it  should  go  to  the  trouble 
of  defending  itself.  If  it  is  made  the  object  of  cal- 
umny, it  should  contradict  and  confound  the  slan- 
derer. 

Its  members  should  ever  remember  that  while  in 
theory  the  Stock  Exchange  is  merely  a  market  for  the 
buying  and  selling  of  securities,  actually  and  collec- 
tively they  constitute  a  national  institution  of  great  im- 
portance and  great  power  for  good  or  ill. 

They  are  officers  of  the  court  of  commerce  in  the 
same  sense  in  which  lawyers  are  officers  of  the  court  of 
law.  They  should  not  be  satisfied  with  things  as  they 
find  them.  They  should  not  take  the  way  of  least  re- 
sistance, but  should  ever  seek  to  broaden  their  own 
outlook  and  extend  the  field  and  scope  of  the  Stock 
Exchange's  activities. 

One  of  the  reasons  for  London's  financial  world  po- 
sition is  that  its  Stock  Exchange  affords  a  market  for 
all  kinds  of  securities  of  all  kinds  of  countries.  The 
English  Stockbroker's  outlook  and  general  or  detailed 
information  range  over  the  entire  inhabited  globe.  It 
is  largely  through  him  that  the  investing  or  speculative 


NEW     YORK     STOCK     EXCHANGE       l6l 

public  is  kept  advised  as  to  opportunities  for  placing 
funds  in  foreign  countries.  He  is  an  active  and  valu- 
able force  in  gathering  and  spreading  information  and 
in  enlisting  British  capital  on  its  world-wide  mission. 

The  viewpoint  of  the  average  American  investor  is 
as  yet  rather  a  narrow  one.  Investment  in  foreign 
countries  is  not  much  to  his  liking.  The  regions  too 
far  removed  from  Broadway  do  not  greatly  appeal  to 
him  as  fields  for  financial  fructification.  Yet,  if 
America  is  to  avail  herself  fully  of  the  opportunities 
for  her  trade  which  the  world  offers,  she  must  be  pre- 
pared to  open  her  markets  to  foreign  securities,  both 
bonds  and  stocks.  If  America  aspires  to  an  economic 
world  position  similar  to  England's,  she  must  have 
among  other  things  financial  (such  as,  first  of  all,  a 
discount  market)  a  market  for  foreign  securities. 

In  educating  first  themselves  and  then  the  public 
to  an  appreciation  of  the  importance  and  attractive- 
ness of  such  a  market,  with  due  regard  to  safety,  and 
to  the  prior  claim  of  American  enterprise  in  its  own 
country,  the  members  of  the  Stock  Exchange  have  an 
immense  field  for  their  imagination,  their  desire  for 
knowledge  and  their  energy.  We  all  of  us  must  try 
to  adjust  our  viewpoint  to  the  situation  which  the  war 
has  created  for  America,  and  to  the  consequences  which 
will  spring  from  that  situation  after  the  war  shall  have 
ceased. 

As  Mr.  Vanderlip  so  well  said  in  a  recent  speech: 
"Never  did  a  nation  have  flung  at  it  so  many  gifts  of 
opportunity,  such  inspiration  for  achievement.  We 
are  like  the  heir  of  an  enormously  wealthy  father. 


l62  BUSINESS     AND     ECONOMICS 

None  too  well  trained,  none  too  experienced,  with  the 
pleasure-loving  qualities  of  youth,  we  have  suddenly, 
by  a  world  tragedy,  been  made  heir  to  the  greatest  es- 
tate of  opportunity  that  imagination  ever  pictured." 

America  is  in  a  period  which  for  good  or  ill  is  a 
turning  point  in  her  history.  To  perform  with  credit 
and  honor,  with  benefit  to  itself  and  to  the  world  the 
part  which  the  favor  of  Providence  has  allotted  to 
this  country,  is  a  weighty  and  solemn  task.  Our  duty 
and  responsibility  are  as  great  as  our  opportunity. 
Shall  we  rise  to  its  full  potentiality,  both  in  a  material 
and  in  a  moral  sense"? 

The  words  of  an  English  poet  come  to  my  mind : 

"We've  sailed  wherever  ships  can  sail, 
We've  founded  many  a  mighty  state, 

God  grant  our  greatness  may  not  stale 
Through  craven  fear  of  being  great." 

It  is  not  "craven  fear"  that  will  prevent  us  from 
attaining  the  summit  of  the  greatness  which  it  is  open 
to  America  to  reach,  for  fear  has  never  kept  back 
Americans — any  more  than  Englishmen — and  never 
will. 

Indifference,  slackness  and  sloth,  lack  of  breadth  and 
depth  in  thought  and  planning;  the  softening  of  our 
fibre  through  easy  prosperity  and  luxury;  unwise  and 
hampering  laws,  inadequacy  of  vision  and  of  purpose- 
ful, determined  effort,  individual  and  national — those 
are  some  of  the  things  that  we  have  to  guard  against. 

God  grant  America  may  not  fail  to  grasp  and  hold 
that  greatness  which  lies  at  her  hand ! 


I 


TWO  YEARS  OF  FAULTY  TAXA- 
TION, AND  THE  RESULTS 


N  criticizing  the  faults  and  pointing  out  the  harm- 
ful effects  of  our  existing  system  of  taxation,  I  am  con- 
scious of  a  rather  ungrateful  task.  The  "kicker"  is 
rarely  a  sympathetic  or  welcome  figure. 

His  voice  is  all  the  more  apt  to  jar  upon  the  pub- 
lic ear  when  the  burden  of  his  song  is  a  plaintive  melody 
on  the  theme  of  taxation,  and  his  habitation  is  east 
of  the  Alleghanies  and  more  particularly  south  of  Ful- 
ton Street,  Borough  of  Manhattan. 

I  can  only  declare  that  I  do  not  mean  to  advocate 
a  plan  of  taxation  which  shall  spare  wealth.  To  do 
so,  would  be  both  wrong  and  fatuous. 

What  I  am  advocating  is  a  policy  and  methods 
which,  while  taking  sincere  and  sympathetic  account 
of  equity  and  social  justice,  shall  not  have  resemblance 
to  the  spirit  and  temper  of  the  plausible  stump  speaker, 
but  shall  be  based  upon  recognition  of  the  teachings 
of  history  and  economics  and  practical  experience,  and 
bear  the  imprint  of  reasonableness  and  dispassionate 
thinking,  free  from  either  favoritism  or  animosity. 

Whatever  may  be  said  by  theorists  or — on  paper — 
proved,  it  is  demonstrated  by  the  actualities  that  every 

January,    1920. 

I63 


164  BUSINESS     AND     ECONOMICS 

one  of  the  taxes  now  in  usage  affects  all  the  people  in 
its  consequences,  direct  or  indirect,  however  hidden  or 
remote  may  be  the  casual  connection. 

Taxation,  while  necessarily  involving  political  and 
social  considerations,  is  essentially  a  problem  in  na- 
tional economics.  It  is  primarily  a  question  of  public 
advantage  wisely,  truly  and  broadly  conceived.  Its 
effects  are  subtle,  profound  and  manifold  and,  unless 
carefully  studied  and  measured  in  advance,  apt  to  crop 
up  in  unexpected  ways  and  places.  The  very  extreme 
of  the  burden  laid  upon  business  and  incomes  by  the 
method  of  taxation  adopted  by  Congress  in  1917  and 
since  continued,  has  partially  defeated  the  purposes 
which  the  framers  of  that  legislation  had  in  view,  and 
at  the  same  time  has  given  rise  to  certain  unforeseen 
and  troublous  developments — as  invariably  happens  in 
the  case  of  extreme  measures,  especially  where  econom- 
ics are  involved. 

No  quarrel  can  be  found  with  the  purpose  of  Con- 
gress to  draw  preponderantly  upon  the  well-to-do  in 
placing  the  weight  of  direct  taxation  incident  to  and 
resulting  from  the  war.  It  is  right  to  seek  to  adjust 
that  burden  as  near  as  may  be  according  to  capacity 
to  bear  it. 

But  even  in  doing  things  from  entirely  praiseworthy 
motives,  it  is  well  to  remember  the  old  French  say- 
ing, that  "virtue  has  been  known,  at  times,  to  be  more 
dangerous  than  vice,  because  it  does  not  feel  itself  sub- 
ject to  tempering  restraints." 

Moreover,  our  tax  legislation,  apart  from  being  shot 
through  with  the  customary  and  expected  elements  of 


FAULTY     TAXATION  165 

politics,  bears  unmistakable  evidence  of  class  and  sec- 
tional bias. 

And  such  bias,  whether  it  be  for  or  against  capital, 
invariably  produces  untoward  results.  Joined  to  un- 
scientific theory,  crude  economic  conceptions,  inapt 
method,  lack  of  moderation,  and  failure  to  gauge  con- 
sequences, it  has  resulted  in  a  revenue  measure  which 
very  naturally  became  a  strongly  contributing  factor 
in  throwing  our  economic  equilibrium  out  of  gear  and 
in  producing  a  harmful  and  troublesome  strain. 

I  hope  I  may  be  credited  with  the  intention  and  pur- 
pose of  speaking  to  the  best  of  my  conscience  and  judg- 
ment from  the  point  of  view  of  the  welfare  of  the  en- 
tire country  and  not  of  the  welfare  merely  of  the  well- 
to-do. 

But,  in  any  event,  the  question  is  not  what  are  the 
motives  from  which  my  arguments  and  conclusions 
spring,  but  whether  those  arguments  are  sound  and 
those  conclusions  justified. 

What  I  propose  to  say  will  not  strike  a  popular  note. 
That  is  additional  reason  why  it  should  be  said. 

Those  who  differ  from  me  are  free  to  express  their 
opinions  and  controvert  mine.  It  is  through  the  meet- 
ing of  conflicting  views  in  the  forum  of  public  opinion 
that  truth  is  sought  and  ascertained  in  a  democracy. 

To  those  who  take  the  view  that  criticism  of  our  ex- 
isting surtax  schedule  is  necessarily  the  "squeal"  of  a 
rich  man,  or  affected  by  the  bias  of  greed,  I  would  point 
out  that  the  rich  man  has  little  to  "squeal"  about  on 
the  score  of  the  income  tax,  provided  he  will  join  the 
ranks  of  the  idle  rich.     All  he  has  to  do,  if  his  con- 


l66  BUSINESS     AND      ECONOMICS 

science  and  disposition  permit  it,  is  to  turn  his  back  on 
work,  risk,  and  constructive  effort,  and  place  as  much 
of  his  capital  as  is,  or  can  be  made  liquid,  into  tax- 
exempt  securities, — and  to  the  extent  that  he  does  so, 
all  direct  taxation  ceases  to  trouble  him.  Granting 
that  existing  tax-exempt  Bonds  (Le.,  Bonds  of  States 
Municipalities,  etc.)  cannot  constitutionally  be  made 
taxable,  it  is  nevertheless  characteristic  of  the  unwis- 
dom and  inaptitude  of  our  revenue  measures  that  Con- 
gress has  done  nothing  to  frame  the  scheme  of  taxa- 
tion in  such  wise  as  to  meet  the  resulting  situation  as 

far  as  practicable. 

*     *     * 

The  four  factors  which,  more  than  any  others,  have 
brought  about  in  this  country  the  present  era  of  eco- 
nomic disturbance  and  high  prices  are,  in  my  judg- 
ment: 

1 .  The  urgency  of  the  world's  demand  for  our  raw 
materials  and  manufactured  articles  during  and  since 
the  war. 

2.  Inflation  of  credit  and  currency. 

3.  Governmental  and  private  extravagance. 

4.  Faulty  taxation. 

All  other  contributory  factors  are  either  of  lesser 
effect  than  is  frequently  attributed  to  them,  or  spring 
more  or  less  directly  from  the  causes  above  mentioned. 

The  world's  demand  for  our  materials  and  services 
is  bound  to  slacken  in  due  course.  The  cure  for  in- 
flation is  a  slow  and  difficult  process.  The  epidemic 
of  extravagance  has  gained  such  headway  that  it  can- 
not be  arrested  rapidly  (though  it  could,  I  think,  and 


FAULTY     TAXATION  1 67 

should  be  attacked  more  effectually  than  is  being  done). 
But  the  remedy  for  faulty  taxation,  and  the  resulting 
relief  to  the  people,  can  be  secured  at  once  whenever  it 
pleases  Congress  and  the  Administration  to  seek  that 
remedy  and  to  apply  it. 

The  fact — it  is  a  fact — that  the  tax  burden  on  those 
of  small  and  moderate  means  is  lighter  in  this  country 
than  it  is  anywhere  else,  is  altogether  to  our  credit. 
But  that  rightful  and  desirable  policy  has  been  ren- 
dered largely  abortive  by  the  faults  of  omission  and 
commission  in  the  designing  of  our  tax  structure. 

The  system  and  method  of  taxation  inaugurated  in 
1917  and  continued  since  have  played  a  very  consid- 
erable part  in  boosting  prices  far  beyond  the  inevitable 
and  natural  effect  of  circumstances  inherent  in  the  sit- 
uation. In  saying  this  I  am  not  giving  expression  to 
an  opinion  based  upon  general  observation,  but  to 
what  I  have  actually  ascertained  by  taking  pains  to  fol- 
low in  concrete  instances,  from  producer  to  retailer, 
the  process  of  the  cumulative  effect  exercised  on  prices 
by  our  existing  taxation. 

Increased  cost  of  manufacture  and  distribution  nat- 
urally means  increased  cost  to  the  farmer,  increased 
cost  of  the  necessities  of  life,  increased  wages,  in  short, 
increased  cost  of  living  all  around. 

The  fact  that  in  other  countries  less  heavily  taxed 
than  ours,  prices  have  increased  as  much  as  here,  or  even 
more,  has  no  bearing  upon  this  statement,  inasmuch  as, 
in  the  case  of  those  countries,  the  course  of  prices  is 
affected  by  elements  which  do  not  come  into  action 
here  or  only  to  a  minor  extent. 


l68  BUSINESS      AND      ECONOMICS 

Our  three  principal  direct  taxes  are: 

1.  The  Excess  Profit  Tax. 

2.  The  Income  Tax. 

3.  The  Inheritance  Tax. 


THE    EXCESS    PROFIT    TAX 

The  social  and  moral  arguments  for  an  unsparing 
war  profits  tax  are  to  my  mind  unanswerable.  To 
permit  individuals  and  corporations  to  enrich  them- 
selves out  of  the  dreadful  calamity  of  war  is  repugnant 
to  one's  sense  of  right  and  justice  and  gravely  detri- 
mental to  the  war  morale  of  the  people.  Moreover, 
the  effect  of  the  war  profits  tax  in  making  for  higher 
prices  is  considerably  mitigated  through  circumstances 
and  agencies  which  are  operative  when  a  country  is  at 
war. 

Quite  different  in  spirit  and  effect  is  the  Excess 
Profit  Tax,  misleadingly  so  called,  which  Congress  has 
deemed  well  to  impose  and  to  continue  after  the  war 
had  come  to  an  end.  That  measure  establishes  as  "nor- 
mal earnings"  an  arbitrary  and,  in  the  case  of  many 
industrial  activities,  inadequate  percentage  of  return 
on  invested  capital,  and  by  a  complex,  confusing  and 
generally  ill-devised  system,  taxes  at  a  high  rate  all 
earnings  above  that  percentage. 

It  lays  a  heavy  and  clumsy  hand  on  successful  busi- 
ness activity.  It  is  grossly  inequitable  in  its  effects, 
and,  to  a  large  extent,  the  greater  or  lesser  degree  of  its 
burdensomeness  is  determined  by  purely  fortuitous  cir- 


FAULTY     TAXATION  169 

cumstances.  It  puts  a  fine  on  energy,  enterprise  and 
efficiency.  It  leaves  untouched  the  man  of  wealth  who 
neither  works  nor  takes  the  risks  and  responsibilities 
of  business,  but  merely  collects  his  coupons.  It  is 
bound  to  operate  unfairly,  freakishly,  and  unevenly, 
and  greatly  enhance  the  cost  of  things. 

There  can  be  no  question  that,  owing  to  the  increased 
cost  of  living  or  the  decreased  purchasing  power  of  the 
dollar,  the  farmer,  the  wage  worker,  the  man  and 
woman  living  on  salaries,  are  entitled  to  a  proportionate 
increase  in  income. 

But  the  enhanced  cost  of  living  and  the  diminished 
purchasing  power  of  the  dollar  affect  the  owner  of 
industrially  invested  capital  no  less  than  they  do  other 
callings.  Moreover,  in  addition  to  these  factors,  he  is 
subject  to  a  heavy  excess  profits  tax  and,  if  his  income 
is  large,  to  an  income  tax  of  unparalleled  severity. 

However,  we  may  leave  out  of  account,  for  the  pur- 
pose of  my  argument  the  relatively  small  number  of 
those  in  possession  of  large  incomes.  When  I  speak 
of  the  owners  of  industrially  invested  capital,  I  mean 
primarily  the  storekeeper,  the  average  merchant,  and 
the  millions  of  men  and  women  who  derive  all  or  part 
of  their  income  from  investment  in  securities  of  corpora- 
tions. 

By  the  same  token  as  the  farmer,  the  wage  worker, 
and  the  salaried  man,  they  feel  the  need  of  a  larger 
return  than  formerly. 

But  there  they  run  up,  first  of  all,  against  the  excess 
profit  tax  in  respect  of  their  own  business  or  the  corpo- 
ration in  which  they  have  invested. 


170  BUSINESS      AND      ECONOMICS 

Let  me  point  out,  incidentally,  that  the  spectacular 
earnings  of  certain  corporations  and  individuals  afford 
no  just  criterion  of  the  earnings  of  business  on  the 
whole. 

As  against  a  number  of  concerns  and  individuals 
who  have  made  exceedingly  great  profits  during  and 
since  the  war,  there  are  numerous  others  whose  earn- 
ings have  shrunk,  and  in  some  cases  very  greatly  shrunk, 
during  and  since  the  war. 

It  may  be  interesting  to  quote  in  this  connection 
the  results  of  an  investigation  made  recently  in  Eng- 
land (where  conditions  appear  to  be  very  similar  to 
those  prevailing  here)  as  to  how  the  increased  cost  of 
certain  articles  in  the  past  two  years  compared  with 
the  two  years  preceding  the  war,  had  been  divided. 

The  investigator  found,  taking  such  increase  as  100 
per  cent.,  that  Labor  received  57  per  cent,  thereof,  the 
State  through  taxation  40  per  cent,  and  Capital  3  per 
cent. 

This  is  not  the  place  to  argue  the  question  whether 
in  the  pre-war  era,  industrially  invested  capital  received 
too  large  a  part  of  the  national  income.  In  some  re- 
spects I  believe  it  did. 

But  since  1914  the  wages  of  labor  have  been  vastly 
increased.  The  farmer  also  rightly  receives  a  much 
greater  return  than  formerly,  and  it  must  be  remem- 
bered that  the  farmer  is  relatively  little  burdened  by 
direct  taxation,  and  the  wage-worker  still  less. 

On  the  other  hand,  the  return  on  capital  invested  in 
industrial  enterprises,  stocks  and  bonds,  after  making 
allowance  for  taxation,  has  been  diminished,  on  the 


FAULTY      TAXATION  I7I 

whole.  If,  in  addition,  it  is  considered  that  the  pur- 
chasing power  of  the  dollar  has  been  reduced  by  nearly 
one-half,  it  will  be  seen  that  the  actual  yield  of  indus- 
trially invested  capital  is  much  less  than  it  was  prior 
to  the  war  and  that  there  has  taken  place  in  fact  a 
considerable  readjustment  in  the  distribution  of  the 
national  income. 

The  excess  profit  tax,  until  the  present  year,  ranged 
from  30  per  cent,  to  65  per  cent,  (under  certain  circum- 
stances even  80  per  cent.)  over  and  above  an  arbitrarily 
fixed,  and  everything  considered,  low  return  on  money 
actually  invested  in  business.* 

In  addition  to  that  every  corporation  had  to  pay  an 
income  tax  of  12  per  cent,  on  its  total  profits. 

Let  us  assume  the  case  of  an  incorporated  business 
for  which  the  excess  profit  tax  amounted  to  say,  40  per 
cent. 

That  means  that  it  was  impossible  for  such  a  busi- 
ness to  make  one  dollar  profit  over  and  above  the  mod- 
erate percentage  fixed  by  statute  without  charging  some- 
thing over  two  dollars  to  the  purchaser.  The  Govern- 
ment takes  the  difference. 

In  addition  to  that,  the  Government,  of  course, 
takes  the  individual  income  tax. 

And  it  must  be  remembered  that  most  articles  before 
reaching  the  ultimate  consumer  pass  through  four  or 
five  different  handlings. 


*  For  the  present  year,  the  excess  profit  tax,  while  reduced,  is  still 
very  severe,  ranging  from  20%  to  40%,  in  addition  to  a  corporate 
income  tax  of  10%  and  individual  income  taxes  up  to  73%  (to  which 
must  be  added  in  many  states,  including  New  York,  a  state  income 
tax). 


172  BUSINESS     AND     ECONOMICS 

The  activities  of  the  producer  of  the  raw  material, 
the  manufacturer,  the  jobber,  and  the  retailer — all 
are  more  or  less  subject  to  this  same  condition. 

Each  expects  to  be  able  to  earn  a  somewhat  larger 
profit  to  take  care  of  the  increased  cost  of  present  day 
living,  whether  it  be  for  himself  as  in  the  case  of  the 
individual  merchant  or  for  the  holders  of  the  securities 
which  he  represents,  as  in  the  case  of  the  corporate  man- 
ager— and  each  must  take  into  account  the  operation 
of  the  excess  profit  tax,  not  to  mention  the  income 
tax. 

And  that  necessarily  spells  increased  cost  to  the 
public. 

I  have  said  "must  take  into  account"  because  what 
the  excess  profit  tax,  as  well  as  the  income  tax,  absorbs, 
is  that  essential  necessity  for  the  conduct  of  a  business, 
cash.  You  cannot  pay  your  taxes  by  turning  over  book 
assets,  or  bills  receivable  or  materials  or  inventories, 
you  must  pay  them  in  cash.  But  while  the  outgo  in 
taxes  payable  to  the  Government  is  all  cash,  the  in- 
come of  most  businesses  is  cash  only  to  a  limited 
extent.  Consequently  the  average  business  man  must 
seek  to  increase  his  margin  of  profit  in  order  to  increase 
his  margin  of  available  cash.  One  of  the  most  un- 
settling consequences  of  our  tax  system  is  the  cash 
drain  which  it  creates,  away  from  its  normal  channels 
into  the  coffers  of  the  Government. 

The  excess  profit  tax  has  tended  furthermore  to  in- 
crease actual  cost  of  production,  inasmuch  as  costs  nat- 
urally are  deducted  before  taxable  profits  are  arrived 
at,  and,  therefore,  under  the  operation  of  the  excess 


FAULTY      TAXATION  I73 

profit  tax,  there  is  not  the  same  inducement  as  under 
normal  circumstances  to  keep  cost  down  as  much  as 
possible,  but  in  fact  rather  the  reverse.  It  is  a  fact 
well  known  to  those  familiar  with  business  practices 
that  there  has  been  gross  wastefulness  in  certain  lines 
of  expenditure,  such,  for  instance,  as  advertising,  since 
the  excess  profit  tax  went  into  effect  and  as  a  direct 
consequence  of  it. 

Nor  is  there  any  longer  any  inducement  to  employ 
accumulated  profits  in  the  business  without  capitalizing 
them — a  practice  largely  employed  heretofore  in  con- 
servatively managed  businesses  and  naturally  tending 
to  lower  cost  of  production. 

On  the  contrary,  there  is  every  inducement  to  capi- 
talize every  justifiable  item — and  this  makes  for  higher 
cost. 

In  introducing  in  Parliament  recently  the  British 
Government's  budget  which  included  provision  for  a 
50  per  cent,  reduction  of  the  British  War  Profits  Tax, 
the  Chancellor  of  the  Exchequer  said  that  experience 
had  shown  that  the  existing  high  rate  "encouraged 
wasteful  expenditure"  and  acted  "as  a  great  deterrent 
to  enterprise,  industry  and  development." 

The  objection  to  a  very  heavy  excess  profit  tax  in 
peace  time  rests  not  so  much  on  equitable  grounds  as 
on  the  ground  that  on  the  one  hand  it  does  not,  and 
cannot,  accomplish  the  social  purpose  aimed  at,  and  on 
the  other  hand  it  tends  to  hurt  trade,  discourage  enter- 
prise, and  burden  the  public.  Our  excess  profit  tax  cer- 
tainly has  not  stopped,  but  rather  has  intensified  what 
is  commonly  termed  "profiteering." 


174  BUSINESS     AND      ECONOMICS 

The  faultiness,  the  complexity  of  the  technical  pro- 
visions of  that  tax,  and  its  baneful  effects  in  various  di- 
rections have  become  so  widely  recognized  that  we 
may,  I  hope,  look  forward  with  reasonable  assurance  to 
its  repeal  or  thorough  modification  in  the  not  very  dis- 
tant future. 

But  to  remove  the  excess  profit  tax  on  corporations 
without  at  the  same  time  greatly  reducing  surtaxes  on 
individuals  would  manifestly  be  a  discrimination 
against  private  business  in  favor  of  corporate  business, 
inasmuch  as  it  would  greatly  impair  the  capability  of 
private  firms  to  compete  with  corporations. 

Moreover,  the  repeal  or  modification  of  the  excess 
profit  tax  will  not  and  cannot  effect  the  relief  which 
the  situation  calls  for,  unless  accompanied  by  a  well- 
judged  revision  of  the  existing  scale  of  taxation  of  in- 
dividual incomes,  as  I  shall  endeavor  to  show  on  the 
following  pages. 

II 

THE    INCOME    TAX 

l.  Comparing  our  income  taxation  with  that  of 
England,  we  find  that  in  that  country  taxation  starts 
with  incomes  (for  married  men)  of  $725,  here  with 
incomes  of  $2,000.  The  English  tax  on  the  smaller 
incomes,  say,  up  to  $5,000,  is,  on  the  average,  about  six 
times  as  heavy  as  ours.  On  the  other  hand,  our  tax  in 
its  upper  scale  is  far  heavier  than  that  of  England.  The 
English  maximum  taxation  is  52^/2%,  ours  is  73%, 
without  including  State  income  taxes.    That  is  by  far 


FAULTY      TAXATION  175 

the  highest  scale  of  income  taxation  existing  anywhere 
in  the  civilized  world. 

The  English  normal  tax,  i.  e.,  the  tax  applicable  to 
the  lowest  incomes,  is  30 %.  Our  normal  tax  is  4% 
on  the  first  $4,000  of  taxable  income,  and  8%  on  in- 
comes above  that  amount.  On  the  other  hand,  the  high- 
est rate  of  English  surtax  is  22^%;  our  highest  rate 
of  surtax  is  65%.  That  is  to  say,  in  England  the  high- 
est income  taxpayer  is  taxed  at  a  rate  less  than  twice 
that  applicable  to  the  lowest  taxpayer  {though  it  must 
be  borne  in  mind  that  certain  deductions  are  allowed  on 
small  incomes).  With  us  {deductions  being  likewise 
allowed  on  small  incomes)  the  highest  income  taxpayer 
is  taxed  at  a  rate  seventeen  times  as  heavy  as  that  ap- 
plicable to  the  lowest  taxpayer. 

Our  scale  of  income  gradation  in  respect  of  small 
incomes  is  juster  and  wiser  than  the  English  scale  and 
greatly  preferable  to  it.  But  our  moderation  in  respect 
to  taxing  small  incomes  makes  all  the  more  conspicuous 
the  unnecessary  and  harmful  extreme  to  which  we  go 
at  the  other  end  of  the  scale. 

2.  While  we  thus  take  away  up  to  three-quarters 
of  his  income  (and  even  more  if  we  include  other 
taxes)  from  the  capitalist  engaged  in  business  or  in- 
vesting his  money  in  supplying  funds  to  our  indus- 
tries, access  is  wide  open  for  other  forms  of  capital  to 
the  safe  and  tempting  refuge  offered  by  tax-exempt 
securities.  All  Municipal  Bonds,  State  Bonds,  Farm 
Loan  Bonds  and — unless  specifically  otherwise  pro- 
vided— Federal  Bonds,  are  free  from  all  taxation,  ex- 
cept inheritance  taxation.     There  are  about  fourteen 


I76  BUSINESS     AND     ECONOMICS 

billion  dollars  of  such  tax-free  bonds  outstanding 
(apart  from  partially  exempt  Liberty  Bonds),  and 
more  are  being  created  all  the  time. 

Under  the  existing  schedule  of  income  taxation, 
the  inducement  to  buy  tax-exempt  bonds  is  so  great, 
and  the  consequent  demand  for  them  so  strong,  that  a 
ready  and  eager  market  at  a  comparatively  low  rate 
of  interest  (from  4^2%  to  5%)  is  offered  to  pretty 
nearly  every  township  and  county,  thus  greatly  facili- 
tating wasteful  spending  by  municipal  and  other  local 
governments. 

Capital  invested  in  such  bonds  not  only  has  been 
and  is  free  from  taxation,  but  owing  to  the  effect  of  the 
income  tax  in  stimulating  the  demand  for  tax-free 
bonds,  such  capital  has  remained  unimpaired  while  cap- 
ital invested  in  taxable  bonds  has  undergone  a  very 
heavy  shrinkage. 

I  am  advised  that  it  is  not  feasible  under  the  con- 
stitutional limitations  of  our  governmental  system,  nor 
would  it  be  fair,  to  remove  the  tax  exemption  from 
such  bonds  of  the  tax-free  class  as  are  now  outstand- 
ing. 

Nor,  as  I  am  informed,  would  it  be  possible,  accord- 
ing to  the  predominant  opinion  of  legal  authorities, 
for  Congress  to  subject  even  future  issues  of  State, 
Municipal  and  County  Bonds  to  taxation,  unless  a 
constitutional  amendment  be  adopted  to  that  effect. 

Personally,  I  do  not  favor  the  institution  of  tax- 
exempt  securities,  because  I  believe  it  economically  un- 
sound and  socially  objectionable — but  we  are  con- 
fronted with  a  condition,  not  a  theory. 


FAULTY     TAXATION  177 

The  discrimination  which  permits  the  owner  of  liquid 
capital  to  escape  all  direct  taxation  by  the  simple 
process  of  buying  Municipal  or  other  tax-exempt  bonds, 
becomes  naturally  all  the  more  effective  and  accen- 
tuated as  the  income  surtax  rate  increases. 

The  existence  of  that  mass  of  non-taxable  securities 
is  therefore  an  additional  consideration  among  those 
which  should  have  bid  our  legislators  pause  before  rais- 
ing the  scale  of  direct  taxation  to  unexampled  heights ; 
it  is  an  unchallengeable  argument  against  the  fair- 
ness, appropriateness  and  productiveness  of  enormous 
supertaxes. 

3.  I  doubt  whether  it  is  fully  realized  by  many 
people  how  immense  is  the  advantage  which  is  enjoyed 
by  capital  invested  in  tax-exempt  securities  as  com- 
pared to  capital  invested  in  business  or  in  corporate 
securities  or  earned  in  salaries.* 

The  following  table  may  therefore  be  of  some  in- 
terest. It  shows  what  percentage  of  returns  would  have 
to  be  obtained  from  such  sources  in  order  to  equal  the 
return  from  a  ^]/2  %  tax-exempt  bond  purchased  at  par. 

*  The  Secretary  of  the  Treasury  in  his  last  report  to  Congress 
proposes  an  indirect  method  for  curtailing  somewhat  the  advan- 
tage accruing  from  the  ownership  of  tax-exempt  securities.  He 
recommends  that,  for  the  purpose  of  determining  the  rate  of  super- 
tax applicable  to  a  person's  income,  the  income  from  tax-exempt 
securities  be  included  in  the  calculation,  and  that  the  rate  of  super- 
tax thus  ascertained  be  considered  as  the  rate  applicable  to  the 
actually  taxable  portion  of  his  income. 

Leaving  aside  the  question  of  the  legality  and  propriety  of  that 
method,  it  manifestly  would  not  accomplish  that  which  ought  to  be 
accomplished.  There  is  only  one  way  to  reduce  the  advantage  of 
tax-exempt  securities,  and  that  is,  in  addition  to  adjusting  our 
supertaxes  to  reasonable  proportions,  to  devise  methods  and  ways 
of  taxation  (such  as  the  expenditures  tax  or  the  sales  tax  referred 
to  in  the  latter  part  of  this  discussion)  which  cannot  be  evaded  by 
the  ownership  of  non-taxable  securities. 


I78  BUSINESS     AND     ECONOMICS 

It  shows,  to  take  an  extreme  instance,  that  in  the  case 
of  a  person  in  the  highest  taxable  class,  he  would  have 
to  make  nearly  17%  upon  a  corporate  security  or  in 
his  business  in  order  to  get  the  same  return  which  he 
receives  by  investing  in  a  tax-free  4^  %  bond. 

And  it  should  be  remembered  that  in  making  up  these 
figures  no  account  is  taken  of  the  excess  profit  tax,  which 
still  further  increases  the  yield  from  tax-free  securities 
as  compared  to  the  yield  from  capital  invested  in  busi- 
ness. Nor  is  account  taken  of  State  income  taxes  or 
local  taxation.    Here  is  the  table : 

A  taxable  security  or  a  business  would  have  to  yield 
the  following  percentages  of  return  in  order  to  bring 
the  same  net  income  as  a  4^%  tax-free  bond  (with- 
out calculating  excess  profits,  State  and  local  taxes)  : 

In  the  case  of  incomes   exceeding  $20,000 —  5.35% 

In  the  case  of  incomes   exceeding  30,000—  5.70% 

In  the  case  of  incomes  exceeding  40,000 —  6.08% 

In  the  case  of  incomes  exceeding  50,000 —  6.52% 

In  the  case  of  incomes  exceeding  60,000 —  7.03% 

In  the  case  of  incomes  exceeding  70,000 —  7.62% 

In  the  case  of  incomes  exceeding  80,000 —  8.33% 

In  the  case  of  incomes  exceeding  90,000 —  9.18% 

In  the  case  of  incomes  exceeding  100,000 — 10.23% 

In  the  case  of  incomes  exceeding  200,000 — 12.50% 

In  the  case  of  incomes  exceeding  300,000 — 14.06% 

In  the  case  of  incomes   exceeding  500,000 — 15.51% 

In  the  case  of  incomes  exceeding  1,000,000 — 16.67% 

In  the  face  of  these  comparisons,  what  inducement 
is  there  for  a  man  to  take  upon  himself  the  risk  and 
drudgery,  the  worries  and  cares  of  active  business,  in 
the  expectation  of  reasonable  profits'?  What  incentive 
is  left  to  him  for  normally  remunerated  effort  and  en- 
terprise under  a  dispensation  which  permits  him  to  re- 
tain but  an  inconsiderable  fraction  of  the  fruits  of  his 
work,  while  the  Government  takes  the  lion's  share  up 


FAULTY     TAXATION  1 79 

to  three-quarters  and  more,  in  direct  taxes'?  Does  it 
not  follow  that  there  will  ensue  either  a  slackening  in 
business  effort  or  a  tendency  to  exact  unduly  and  un- 
desirably large  profits  so  as  to  offset  the  burden  of 
taxes  *? 

4.  It  is  manifest  from  the  figures  I  have  quoted 
that  no  bond — foreign  or  domestic — can  compete  in 
interest  yield  with  the  attractiveness  of  tax-exempt 
bonds  to  those  in  possession  of  surplus  incomes  of  any 
considerable  size. 

And  it  is  just  these  persons  who  form  the  clientele 
that  in  the  past  has  been  the  mainstay  of  our  invest- 
ment market,  for  the  masses  of  the  American  people 
have  not  heretofore  been  in  the  habit  of  putting  their 
savings  into  corporate  bonds. 

Prior  to  the  war  there  were  less  than  400,000  indi- 
vidual owners  of  bonds  in  the  United  States.  I  have 
no  reliable  figures  which  would  enable  me  to  judge  to 
what  extent  the  number  of  small  bond  investors  has 
increased  within  the  past  few  years  (apart  from  inves- 
tors in  Liberty  Bonds).  It  doubtless  has  increased,  but 
the  aggregate  buying  power,  or  rather,  buying  inclina- 
tion of  the  small  investor,  has  by  no  means  made  up, 
and  is  not  at  all  likely  to  make  up,  for  the  defection  of 
the  larger  investor. 

The  fact  that  approximately  twenty  million  people 
bought  Liberty  Bonds  during  the  war  is  no  criterion. 
Their  motive  was  not  investment  but  patriotism. 

Moreover,  the  experience  which  they  have  had  in 
seeing  a  heavy  and  continuing  decline  in  the  price  of 
those  classes  of  Liberty  Bonds  which  are  only  partially 


l80  BUSINESS     AND      ECONOMICS 

tax-exempt,  is  hardly  calculated  to  encourage  them  to 
make  investments  in  bonds. 

5.  Some  of  the  results  of  exorbitant  and  unparal- 
leled direct  taxation  on  the  one  hand  and  the  existence 
of  a  huge  volume  of  tax-free  securities  on  the  other, 
have  been  these : 

(A  )  The  possessors  of  incomes  of  larger  size,  gen- 
erally speaking,  have  gone  on  strike  as  far  as  investing 
in  taxable  securities  is  concerned,  thus  greatly  dimin- 
ishing the  quantity  of  funds  available  for  private  en- 
terprise. To  the  extent  that  they  still  buy  such  secur- 
ities, they  demand  far  higher  interest  rates  than  for- 
merly, in  order  to  recoup  a  portion,  at  least,  of  the 
impairment  of  their  income. 

That  enhances  the  cost  of  capital  and  makes  for 
higher  prices  of  all  articles. 

(B)  In  consequence  largely  of  this  attitude  of  self- 
defense  on  the  part  of  private  capital,  the  American 
investment  market,  to  a  great  extent,  has  ceased  to 
function  for  the  time  being.  Unparalleled  stagnation 
has  characterized  it  for  many  months. 

The  shrinkage  in  the  value  of  existing  corporate 
bonds,  which,  though  in  part  due  to  causes  of  a  general 
character,  is  to  the  largest  extent  attributable  to  the 
income  tax,  amounts  to  billions  of  dollars. 

There  are  a  number  of  good  railroad  bonds  which 
sell  on  a  basis  to  yield  from  7^2%  to  8^2%  annually. 
There  are  foreign  Government  bonds  of  unquestionable 
soundness  which  sell  on  a  basis  to  yield  10%. 

A  really  successful  investment  issue  of  larger  size, 
even  at  what  formerly  would  have  been  considered  ex- 
traordinarily attractive  rates  of  interest,  has  not  been 
known  for  a  long  time. 

(The  fact  that  the  recent  issue  of  a  foreign  loan 


FAULTY     TAXATION  l8l 

here  was  successful  does  not  modify  this  statement, 
inasmuch  as  it  was  an  offering  not  of  bonds  but  of 
short  maturity  notes,  and  there  was  attached  to  it  a 
speculative  attraction  in  the  shape  of  an  exchange 
privilege  holding  out  the  possibility  of  a  profit  of  as 
much  as  fifty  per  cent.) 

The  seriousness  of  the  situation  of  our  investment 
market,  and  its  grave  portent,  have  not  received  as 
yet  the  attention  which  they  deserve,  especially,  too, 
in  view  of  the  financial  requirements  of  the  railroads, 
which  can  be  met  only  through  the  investment  market. 

The  free  flow  of  capital,  the  normal  working  of 
that  market  are  absolutely  basic  elements  for  every 
kind  of  trade  and  industry.  The  effects  of  their  dis- 
turbance to  any  serious  degree  for  any  length  of  time 
are  all-pervading. 

We  cannot  have  a  return  to  normal  conditions  of 
trade,  prices,  etc.,  until  our  investment  market  will 
have  come  within  measurable  distance,  at  least,  of 
normal  conditions. 

And  that  is  impossible  as  long  as  our  present  income 
tax  remains  in  force,  even  if  the  other  elements  which 
have  operated  to  bring  about  the  present  abnormal 
situation  were  removed. 

(C)  Our  new-born  aspiration  to  be  the  great  finan- 
cial mart  of  the  world  has  been  strangled  in  its  cradle 
because  a  broad,  active  and  receptive  investment  mar- 
ket is  an  indispensable  prerequisite  for  the  establish- 
ment of  a  potent  financial  centre.* 

*  It  is  true,  England  also  has  a  heavy  income  tax,  though  much 
less  heavy  than  ours  in  its  higher  scales;  but  such  tax-exempt  bonds 
as  exist  in  England  are  free  from  the  NORMAL  income  tax  only  and 
not  from  supertaxes,  and  there  are  sundry  other  reasons  why  the 
effect  of  the  British  Income  Tax  is  not  the  same  as  it  is  with  us  from 
the  point  of  view  of  international  finance  and  trade.  Furthermore, 
the  British  Income  Tax  is  not  as  all-embracing  in  its  scope  as  ours. 
For  instance,  profits  made  by  a  person  otherwise  than  in  his  regular 
trade  are  not  subject  to  the  income  tax  at  all,  in  England. 


l82  BUSINESS      AND      ECONOMICS 

It  is  wholly  futile,  under  our  present  income  tax, 
to  expect  private  capital  to  invest  to  any  adequate 
degree  in  issues  here  of  foreign  securities,  and  thus 
to  aid  in  relieving,  to  an  extent  at  least,  the  unpre- 
cedentedly  abnormal  state  of  the  exchange  rates,  which 
if  left  to  itself  is  bound,  sooner  or  later,  to  prove  a 
formidable  obstacle  to  our  export  trade  and  otherwise 
to  have  a  seriously  detrimental  reaction  upon  our  own 
affairs. 

(I  do  not  fail  to  recognize  that  to  a  large  extent 
the  remedy  against  the  depreciation  of  their  exchanges 
must  come  by  action  of  the  European  nations  them- 
selves.) 

If  we  wish  the  world  to  continue  to  buy  from  us  on 
a  large  scale,  if  we  wish  to  do  what  duty  and  self- 
interest  demand  in  aiding  Europe  to  normalize  and 
stabilize  itself,  and  unless  we  are  prepared  to  forego 
those  opportunities  of  lasting  value  to  the  country, 
which  the  present  situation  offers,  we  must  be  willing 
to  advance  considerable  funds  to  our  foreign  customers, 
as  England,  France  and  Germany  have  always  done 
to  theirs  in  pre-war  times,  and  as,  indeed,  England  is 
doing  now  to  the  extent  of  her  ability. 

The  banks  and  exporters  cannot  possibly  carry  the 
whole  load  of  financing  such  advances.  We  may  not 
look  to  the  Government  to  intervene.  Private  invest- 
ment capital  cannot  be  induced  to  come  forth  ade- 
quately under  the  circumstances  above  explained. 

The  deadlock  is  bound  to  persist  until  our  policy  and 
methods  of  taxation  will  have  been  revised  and  modi- 
fied. 

A  very  regrettable  impression  is  created  abroad  by 
the  fact  that  at  a  time  when  we  alone  are  capable  of 
supplying  the  nations  with  urgently  needed  funds, 
the  American  public  fails  to  respond  adequately,  and 
when  our  market  does  accord  loans  to  foreign  coun- 


FAULTY     TAXATION  183 

tries,  very  onerous  conditions  are  exacted.  The  fault 
is  unjustly  attributed  to  an  ungenerous  desire  to  take 
greedy  advantage  of  Europe's  necessities,  when,  as  a 
matter  of  fact,  the  cause — apart  from  the  natural  re- 
sults of  prevailing  conditions — is  primarily  to  be  found 
in  the  circumstances  above  mentioned. 

There  is  widespread  expectation  that  when  and  if 
the  Peace  Treaty  is  ratified  by  the  United  States, 
the  effect  of  that  act  will  go  a  long  way  to  cure  the 
existing  state  of  the  international  exchanges  by  setting 
in  motion  a  free  flow  of  American  credits  to  European 
nations.  Those  who  hold  that  view  are,  I  venture  to 
think,  harboring  a  delusion. 

While  the  eventuality  referred  to  would  very  likely 
be  reflected  to  a  certain  degree  and  for  a  certain  time 
in  a  movement  of  the  exchanges  toward  a  less  abnormal 
level,  yet  the  influences  behind  such  a  movement  would, 
I  think,  be  largely  sentimental  and  therefore  only 
temporary  in  their  effect. 

The  credits  which,  apart  from  advances  by  our  Gov- 
ernment, we  have  already  extended  to  Europe  amount 
to  a  much  larger  aggregate  than  is  generally  supposed. 
Our  banks  and  other  financial  institutions  and  export- 
ing houses  cannot  safely  go  much  further.  Our  credit 
structure  is  greatly  strained  as  it  is. 

The  only  large  reservoir  which  can  still  be  tapped, 
is  the  mass  of  private  investment  capital,  and  the  way 
to  that  reservoir  is  barred  by  the  faults  of  the  income 
tax. 

(D)  Apart  from  the  scale  of  taxation,  there  are 
various  provisions  in  our  income  tax  law  which  handi- 
cap the  American  business  man  as  against  his  Euro- 
pean competitor. 

A  common  characteristic  of  these  provisions  is  that 
while  nationally  harmful  in  their  effect,  they  are  little 
productive  of  revenue. 


184  BUSINESS      AND      ECONOMICS 

Thus,  for  instance:  A  free  inflow  and  outflow  of 
foreign  funds  is  essential  to  the  functioning  of  a  finan- 
cial and  commercial  world  centre.  In  recognition  of 
this  fact,  England  not  only  does  not  tax  bank  deposits 
belonging  to  aliens,  but  on  the  contrary,  offers  special 
inducements  to  attract  such  deposits.  But  Congress 
has  subjected  such  bank  deposits  here  (as  also  foreign 
holdings  of  American  commercial  paper)  to  the  Amer- 
ican income  tax  and  thereby  naturally  deterred  them 
from  coming  here.  Or,  another  instance:  The  prac- 
tice in  England  is  that  foreign  holders  of  British  secur- 
ities are  taxed  only  at  the  rate  of  her  normal  income 
tax.  No  filing  of  schedules  or  other  formalities  are 
exacted  from  them,  and  they  are  not  taxed  at  all  on 
profits  realized  from  buying  and  selling  bonds  or  stocks 
in  the  English  market.  Likewise  in  the  case  of  divi- 
dends on  stocks,  if  the  corporation  itself  pays  the 
normal  tax  in  respect  of  such  dividends — which  is  the 
rule  rather  than  the  exception — foreign  holders  are  sub- 
jected to  no  tax  at  all.  Our  Congress,  on  the  other 
hand,  subjects  foreign  holders  of  American  investments 
to  the  full  weight  and  complexity  and  obnoxious 
formalities  of  the  American  Income  Tax. 

(E)  Seeking  because  of  the  income  tax  and  the 
high  cost  of  things  a  correspondingly  higher  return 
on  their  capital,  not  a  few  of  those  who  heretofore 
were  in  the  habit  of  placing  their  funds  in  safe  invest- 
ment securities  have  been  tempted  and  induced  to  turn 
to  speculation.  The  promoter  of  "get-rich-quick" 
schemes  has  been  reaping  a  harvest.  The  housing  famine 
and  the  resulting  hardships  and  high  rentals  are  due  in 
considerable  part  to  the  fact  that  capital  has  to  a  great 
extent  withdrawn  from  the  field  of  real  estate  mort- 
gages because  they  do  not  yield  sufficiently  attractive 
returns  after  taking  into  account  the  income  tax. 

(F)  Excessive  direct  taxation  prevents  that  meas- 


FAULTY     TAXATION  185 

ure  of  accumulation  of  surplus,  which  is  needed  for 
the  normal  expansion  of  the  country's  business. 

It  does  this  all  the  more  effectively,  as  business  men 
of  necessity  have  only  a  limited  amount  of  their  capital 
in  the  form  of  liquid  or  quickly-realizable  assets,  and 
it  is  just  these  assets  which  are  absorbed  by  taxation 
because  taxes  must  be  paid  in  cash. 

If  business  men  cannot  accumulate  adequate  working 
capital,  the  result  will  be  either  reaction  in  trade  and 
restriction  in  production,  or  demands  for  credit  in  such 
volume  as  to  bring  about  a  dangerous  and  harmful 
strain. 

Increased  production  is  one  of  the  crying  needs  of 
the  hour.  But  increased  production  necessarily  means 
the  use  of  increased  capital.  It  means  that  the  business 
man  must  have  an  adequate  surplus  at  the  end  of  the 
year  in  order  to  perfect  his  plant,  to  enlarge  his  opera- 
tions, etc. 

Where  is  he  to  find  that  surplus  if  taxes  are  so 
heavy  that  but  little  is  left  to  him  after  meeting  his 
own  and  his  family's  expenses'?  How  is  he  to  obtain 
that  capital  unless  by  the  dangerous  expedient  of  con- 
stant and  heavy  borrowing,  which,  moreover,  he  will 
not  always  find  possible4? 

These  same  considerations,  though  naturally  some- 
what modified  in  their  application,  hold  good  in  the 
case  of  corporations.  And  the  present  attitude  of  in- 
vestors has  had  the  result  that  large  corporations  which 
ordinarily  would  meet  their  financial  requirements  by 
having  recourse  to  the  investment  market,  are  com- 
pelled in  many  cases  to  resort  to  the  banks  for  loans 
and  credits,  thus  competing  for  such  accommodation 
with  the  smaller  merchant  and  intensifying  the  jam 
and  congestion  of  the  credit  situation. 

In  connection  with  this  matter  of  the  need  of  work- 
ing capital  for  industry,  it  should  be  borne  in  mind 


l86  BUSINESS     AND     ECONOMICS 

that  owing  to  the  rise  in  prices  and  wages  it  takes  a 
great  deal  more  capital  to  do  the  same  volume  of 
business  than  it  did  prior  to  the  war. 

In  considerable  part,  the  existing  stringency  and 
strain  in  the  credit  and  money  market  is  due  to  the  fact 
that  liquid  surplus  capital  heretofore  available  for  busi- 
ness and  investments  is  now  appropriated  to  a  pre- 
ponderant extent  by  the  Government  in  taxes.  The 
plausible  conception  that  money  gathered  and  spent  by 
the  Government  is  or  can  be  equally  effective  in  promot- 
ing progress  and  prosperity  as  money  employed  in  the 
normal  course  of  trade  and  business,  is  and  has  been 
unmistakably  proved  wholly  fallacious. 

(G)  Enterprise  is  hampered  by  the  taxation  now 
in  force  and  thereby  production  retarded.  An  apparent 
contradiction  to  this  statement  may  be  seen  in  the  great 
industrial  activity  which  prevails  now  and  has  pre- 
vailed for  some  time.  But  the  contradiction  is  merely 
an  apparent  one. 

Our  present  prosperity  is  due  to  abnormal  causes. 
It  is  not  normal  in  its  concomitants,  nor  is  it  at  all 
uniform  or  even  in  its  workings. 

New  enterprise  is  largely  confined  to  those  activities 
in  which,  owing  to  prevailing  conditions,  wholly  ab- 
normal profits  are  possible,  profits  so  great  that  they 
can  stand  exorbitant  taxation. 

Such  activity  as  is  based  upon  what  were  formerly 
considered  ordinary  profits  is  greatly  restricted,  neces- 
sarily so  because  normal  business  cannot  make  an  ade- 
quate living  or  offer  commensurate  inducements  under 
existing  conditions  of  taxation. 

And  steady,  reasonably  compensated  activity  and 
enterprise  are,  after  all,  the  really  desirable  kind,  from 
the  social  and  economic  point  of  view,  rather  than  a 
state  of  hectic  rush,  based  upon  a  transitory  demand 
which  does  not  count  the  cost. 


FAULTY     TAXATION  187 

I  know  of  my  own  knowledge  numerous  instances 
within  the  past  two  years  when  useful  and  desirable 
transactions  which  ordinarily  would  have  been  under- 
taken were  turned  down  on  the  ground  that  after  de- 
ducting the  share  which  the  Government  would  take 
in  taxes,  there  was  so  little  left  as  compensation  for 
the  effort  and  risk  involved,  that  there  was  no  longer 
any  inducement  reasonably  sufficient  to  justify  that 
effort  and  risk. 

(H)  One  of  the  most  valuable  by-products  of 
wise  taxation  is  the  promotion  of  thrift.  There  never 
was  a  time  when  thrift  was  more  urgently  essential  than 
it  is  now. 

The  vast  possibilities  of  saving  do  not  rest  with 
the  relatively  small  number  of  wealthy  people,  espe- 
cially now  when  their  spending  power  has  been  greatly 
decreased  through  taxation,  but  with  those  elements 
among  the  masses  of  the  people  whose  spending  power 
has  been  very  largely  increased  within  the  past  five 
years.  Our  legislators  have  completely  failed  to  use 
the  instrument  of  taxation  to  promote  economy  in  ex- 
penditures among  those  elements.  And  in  the  case 
of  the  well-to-do,  the  very  hugeness  of  the  taxes  im- 
posed actually  discourages  saving,  or  makes  it  impos- 
sible. The  excess  profit  tax  and,  by  reason  of  the  kind 
and  manner  of  its  gradation,  the  income  tax,  instead 
of  promoting  restraint  in  expenditures,  are  rather 
breeders  of  extravagance. 

Our  taxation  impairs,  far  beyond  need  or  reason, 
the  incentive  to  effort  and  saving  and,  at  the  same  time, 
makes  all  too  smooth  and  easy  the  path  of  wasteful 
governmental  spending. 

An  evil — more  serious  than  is  generally  appreciated 
and  again  an  element  making  for  high  prices — is  the 
huge  and  cumbersome  machinery  incident  to  the  deter- 


l88  BUSINESS     AND     ECONOMICS 

mination  and  collection  of  certain  of  our  taxes,  notably 
the  excess  profit  and  income  taxes. 

Stamp  taxes  practically  collect  themselves.  The  col- 
lection of  the  income  and  excess  profit  taxes,  on  the 
other  hand,  is  an  enormously  costly  thing. 

To  begin  with,  there  are  the  number  and  expense 
of  additional  employees  of  the  Treasury;  and  this  num- 
ber and  expense,  according  to  what  information  I  have 
been  able  to  obtain,  are  so  amazingly  large  that,  in 
the  absence  of  official  confirmation  I  hesitate  to  men- 
tion the  figure. 

Then  there  is  the  time  and  cost  of  the  reports  which 
have  to  be  filed  by  the  individuals,  firms  and  corpora- 
tions, reports  so  detailed,  intricate  and  manifold  that 
they  call  throughout  the  nation  for  the  services  of 
many  thousands  of  clerks,  accountants  and  lawyers 
and  for  many  hours  of  the  time  and  thought  of  busi- 
ness men. 

A  gentleman  at  the  head  of  a  fair-sized  business  in- 
formed me  recently  that  in  connection  with  our  State 
and  Federal  tax  measures,  and  at  the  call  of  the  be- 
wildering variety  of  commissions  created  in  recent 
years,  he  is  required  to  furnish  in  the  course  of  one  year, 
apart  from  incidental  reports  due  to  the  workmen's 
compensation  and  similar  acts,  not  less  than  eighty-six 
different  reports  (about  to  be  increased  by  twenty-three 
in  consequence  of  recent  legislation).  He  calculates 
the  actual  cost  to  which  he  is  being  put  in  connection 
with  the  preparation  of  these  reports  and  the  require- 
ments incident  thereto  at  the  sum  of  $14,000  per  an- 
num, aside  from  the  value  of  his  own  time. 

Now,  all  these  things  spell  increased  prices  to  the 
community  in  two  ways.  First :  the  actual  cost  of  clerk 
hire,  accountants'  and  lawyers'  fees,  etc.,  is  added  to 


FAULTY     TAXATION  189 

the  cost  of  the  product.     Secondly:  national  produc- 
tivity is  diminished — 

(a)  By  the  time  and  effort  devoted  to  cumbrous 
and  complex  formalities; 

(b)  By  the  withdrawal  from  creative  activities, 
mental  or  physical,  of  the  army  of  men  who  are  em- 
ployed by  the  Government  and  by  individuals,  firms 
and  corporations  in  connection  with  the  determination 
and  collection  of  taxes  and  kindred  functions,  and  who, 
however  industrious  they  may  be,  add  nothing  to  the 
total  of  the  nation's  assets,  but  on  the  contrary,  are 
maintained  at  the  expense  of  the  nation. 

The  actual  cost,  direct  and  indirect,  to  the  Govern- 
ment of  the  collection  of  the  income  and  excess  profit 
taxes  has  never  been  stated,  as  far  as  I  am  aware.  I 
believe  if  it  were  precisely  ascertained  and  announced, 
the  figures  would  present  an  astounding  total. 

And  if  there  were  added  to  them  the  incidental  ex- 
pense to  individuals,  firms  and  corporations,  the  aggre- 
gate would  be  nothing  less  than  staggering  in  its  mag- 
nitude. 

These  and  other  baneful  effects  directly  traceable  to 
short-sightedly  excessive  and  clumsy  taxation  of  capi- 
tal, merely  go  to  confirm  old  and  tested  truths  well 
known  to  every  student  of  taxation.  Thus,  for  in- 
stance : 

An  excessive  tax  destroys  its  own  productivity.  The 
great  nations  of  Europe  have  been  and  are  under  an 
infinitely  greater  financial  strain  than  our  country  was 
or  is.  The  Cabinets  in  these  countries  have  under- 
gone many  changes  in  the  last  five  years.  They  have 
included  Socialists  and  Representatives  of  Labor.  In 
the  determination  of  their  taxation  program  they  have 


190  BUSINESS     AND      ECONOMICS 

had  the  assistance  .of  the  best  economic  brains  of 
Europe.  England,  France  and  Italy  are  probably  no 
less  democratic  in  their  economic  policies  and  purposes 
than  we  are.  Yet,  no  European  Government  has 
deemed  it  wise  and  advantageous  to  the  state  to  impose 
rates  of  income  taxation  as  high  as  the  upper  grades 
of  ours.  If  all  European  nations  except  Bolshevist 
Russia  have  stopped  at  certain  limits  of  income  tax- 
ation, much  below  ours,  the  reason  is  not  that  they 
are  animated  by  any  greater  tenderness  for  rich  men 
than  we  are,  but  that  they  have  recognized  the  un- 
wisdom and  economic  ill-effect  of  going  beyond  these 
limits. 

Extreme  rates  of  taxation  do  not  and  cannot  fully 
reach  those  whom  they  are  intended  to  reach,  but  they 
do  inevitably  reach,  in  one  way  or  another,  in  their 
ultimate  consequences,  the  masses  of  the  people. 

He  who  would  lead  the  people  to  believe  that  they 
can  be  benefited — or,  indeed,  that  they  are  other  than 
greatly  harmed — by  oppressive  taxation  of  capital, 
fools  himself,  or  attempts  to  fool  others. 

Such  taxation  is  bound,  in  the  end,  to  lead  to  stag- 
nation and  retrogression.  The  prosperity  of  a  com- 
munity is  a  matter  of  manifold  and  subtle  interrela- 
tions. In  the  long  run  labor  cannot  be  abundantly 
employed  and  well  paid  nor  can  the  farmer  and  the 
small  trader  be  prosperous  unless  business  at  large  is 
enabled  to  grow  and  prosper. 

Faulty  taxation  affects  the  masses  of  the  people  un- 
avoidably and  harmfully,  even  though  it  be  in  no  way- 
laid upon  them  in  the  shape  of  direct  or  indirect  gov- 
ernmental imposts.*    In  fact,  it  is  likely  to  affect  them 


*  I  had  occasion  recently  to  read  an  article  published  in  the  London 
Magazine  about  a  century  and  a  half  ago,  to  be  exact,  in  the  year 


FAULTY     TAXATION  I9I 

more  adversely  and  acutely  than  even  taxation  which, 
to  a  moderate  and  carefully  measured  extent,  is  laid 
upon  them,  provided  that  such  taxation  is  wise  and 
scientific. 

Extravagance,  log-rolling,  the  unwise  and  inefficient 
expenditure  of  money  by  governmental  bodies  count 
among  the  acknowledged  foibles  of  Democracy.  The 
structure  of  our  income  tax  schedule  encourages  these 
foibles,  in  that  it  creates  the  belief  that  the  great  bulk 
of  government  expenditures  is  provided  out  of  the 
pockets  of  the  well-to-do  without  materially  burdening 
the  rest  of  the  community. 

The  formula  of  a  very  small  normal  tax  and  enor- 
mous surtaxes  acts  as  a  strong  stimulant  to  wasteful- 
ness on  the  part  of  executives,  heads  of  departments 
and  legislators,  in  that  it  tends  to  lessen  their  salutary 
qualms  on  the  score  of  being  held  to  account  by  the 
people  for  the  resulting  tax  burdens.  It  is  all  too  in- 
vitingly easy  to  meet  rising  expenditures  by  giving  the 
surtax  screw  another  twist  of  a  few  per  cent.,  or  to 
maintain  an  exorbitant  level  of  expenditures  in  nor- 
mal times  by  leaving  the  surtaxes  at  rates  which  were 
meant  to  cover  the  needs  of  an  extraordinary  emer- 
gency. 

By  the  opiate  of  such  taxation  which  apparently 
touches  them  but  very  little  or  not  at  all,  the  masses 

1767.  It  deals  with  and  analyzes  the  causes  of  a  then  existing  situa- 
tion, strikingly  similar  to  that  which  prevails  with  us  at  present. 

The  following  extracts  from  that  article  may  appropriately  be 
quoted : 

"Every  new  tax  does  not  only  affect  the  price  of  the  commodity  on 
which  it  is  laid,  but  that  of  all  others,  whether  taxed  or  not  and  with 
which  at  first  sight  it  seems  to  have  no  manner  of  connection.  .  .  . 

"Taxes,  like  the  various  streams  which  form  a  general  inundation, 
by  whatever  channels  they  separately  find  admission,  unite  at  last 
and  overwhelm  the  whole.  .  .  . 

"The  increase  of  taxes  must  increase  the  price  of  everything, 
whether  taxed  or  not,  and  this  is  one  principal  cause  of  the  present 
extraordinary  advance  of  provisions  and  all  the  necessaries  of  life." 


192  BUSINESS     AND     ECONOMICS 

of  the  people  are  apt  to  be  lulled  into  a  sense  of  rela- 
tive indifference  to  governmental  wastefulness;  but 
the  facts  remain  awake  and  inexorably  at  work,  and 
their  working  means  and  has  always  meant  that  gov- 
ernmental extravagance  is  visited  not  upon  one  class, 
but  upon  all  the  people. 

Wrong  economics,  however  well  intentioned,  have 
been  more  fruitful  of  harm  to  the  people  than  almost 
any  other  single  act  of  government. 

A  tax  which  is  regarded  and  accepted  as  reasonable, 
is  likely  to  bring  at  least  as  high  a  yield  as  a  tax  which 
those  upon  whom  it  falls  feel  justified  in  regarding  as 
grossly  and  needlessly  excessive.  An  income  tax  in- 
creased, of  course,  over  the  rates  prevailing  before  the 
war,  yet  keeping  within  the  bounds  of  moderation, 
would  produce  probably  little  less  revenue  than  the 
existing  tax — and  with  far  less  economic  disturbance 
and  hindrance  to  the  country. 

Governmental  greed,  just  like  private  greed,  is  apt 
to  overreach  itself.  Many  transactions  on  which  those 
concerned  would  willingly  pay  a  moderate  tax,  are  now 
simply  being  laid  aside  and  not  effected  at  all  because 
of  the  intolerable  taxation  to  which  they  would  be 
subjected.  Others  are  being  concluded  in  an  artificial, 
round-about  unsatisfactory  way  so  as  to  avoid  the  full 
burden  of  the  tax.  The  result  in  either  case  is  a  loss 
of  revenue  to  the  Government  and  an  impediment  to 
business. 

While  business  and  accumulated  capital  are  natural- 
ly the  principal  single  sources  of  revenue,  there  is  a 
point  beyond  which  these  sources  cannot  be  used  wise- 
ly, safely  or  effectively.  To  supplement  them,  nu- 
merous other  means  of  providing  revenue  are  available. 
The  framers  of  our  tax  legislation  have  resorted  to 
them  only  unwillingly  and  inadequately,  although  they 
are  being  greatly  and  successfully  used  in  all  other 


FAULTY     TAXATION  193 

countries.  Taxes  of  that  nature,  while  largely  pro- 
ductive in  the  aggregate,  are  so  trifling  in  their  units 
as  to  be  barely  perceptible  in  effect,  and  they  have 
the  great  advantage  of  collecting  themselves  almost 
automatically,  whereas  the  expense,  labor  and  com- 
plexities both  to  the  Government  and  the  tax  payer, 
which  the  collection  of  the  income  and  excess  profit 
taxes  involve  under  the  provisions  of  the  existing  law, 
are  of  staggering  magnitude. 

I  am  aware  that  the  contention  has  been  put  for- 
ward as  an  argument  for  the  existing  scale  of  taxation 
of  incomes  and  profits  that  it  is  a  desirable  thing  in 
itself  to  place  limitations  upon  a  person's  income.  But 
if  that  principle  were  once  to  be  admitted,  where  would 
its  application  stop?  Where  would  the  permissible 
limit  of  earnings  be  fixed  and  how  long  would  it  stay 
there?  The  whole  theory  of  such  a  contention  is  in- 
compatible with  our  traditions  and  with  the  spirit  and 
essence  of  our  institutions.  And  I  feel  certain  that  the 
vast  majority  of  the  American  people  are  not  pre- 
pared to  permit  a  temporary  emergency  to  uproot  the 
basic  conceptions  of  our  economic  and  social  system 
and  to  put  in  their  place  the  doctrines  and  methods  of 
Socialism  or  some  kindred  outlandish  creed. 

No  doubt  the  prevailing  apportionment  of  monetary 
reward  is  not  free  from  defects  (though  less  so  in  this 
country  than  anywhere  else),  but  there  has  been  a 
steady  and  pronounced  tendency  and  movement,  espe- 
cially within  this  generation,  toward  mending  such  de- 
fects and  remodelling  inequitable  conditions.  Evolu- 
tion and  the  irresistible  powers  which  make  for  progress, 


194  BUSINESS     AND      ECONOMICS 

enlightenment  and  justice  may  be  depended  upon  to 
continue  and  advance  that  process.  There  can  be  no 
turning  back.  But  improvident  measures  of  economic 
violence  will  not  hasten  that  process;  on  the  contrary, 
they  will  impede  it. 

Thus  far,  no  civilized  nation  has  ventured  upon  the 
step  of  placing  a  limit  on  what  a  man  may  earn.  The 
consequences  and  repercussions  of  such  an  act  would 
be  almost  incalculable,  and  they  would,  I  am  sure, 
prove  sinister  and  destructive.  At  any  rate,  if  we  ever 
want  to  make  so  fundamental  an  alteration  in  our  eco- 
nomic order,  the  proposition  needs  first  to  be  exhaus- 
tively discussed  before  the  people  in  all  its  bearings, 
so  that  its  inevitable  consequences  may  be  clearly 
understood;  and  the  people  must  then  have  the  op- 
portunity to  pronounce  themselves  upon  the  subject 
definitely  and  unmistakably.  Certainly,  the  purpose 
must  not  be  sought  to  be  accomplished  without  a  posi- 
tive mandate,  by  indirection,  in  the  guise  of  a  revenue 
measure. 

Ill 

THE    INHERITANCE    TAX 

The  general  tenor  of  the  arguments  contained  in 
the  foregoing  chapter  applies,  though  in  a  lesser 
degree,  to  inheritance  taxation,  the  maximum  of  which 
under  the  existing  law  is  40%.  And  again,  there  are 
to  be  added  to  Federal  taxation  the  rates  of  legacy 
and  inheritance  taxation  in  the  several  states. 

I  am  convinced  that  a  progressive  inheritance  tax 
ought  to  and  will  continue  as  a  permanent  feature  of 


FAULTY     TAXATION  195 

our  fiscal  policy.  The  arguments  for  it  from  the  social 
point  of  view  are  unanswerable  and  compelling,  even 
though  in  the  strictly  economic  aspect  of  its  workings 
it  is  open  to  certain  objections  unless  kept  within 
somewhat  circumscribed  limits. 

It  would  exceed  the  bounds  of  this  discourse  to 
enter  into  a  complete  consideration  of  the  subject  of 
inheritance  taxation.  While  emphasizing  my  belief  in 
the  principle  of  such  taxation  as  just  and  called  for, 
I  will  set  forth  a  few  of  the  arguments — though  by  no 
means  all — which  bear  upon  the  question  of  measuring 
the  extent  to  which  it  may  wisely  and  effectively  be 
imposed. 

To  a  certain  degree,  inheritance  taxation,  in  its  very 
nature,  has  the  economic  ill  effect  of  impairing  or  some- 
times even  destroying  that  which  a  lifetime  of  indi- 
vidual work  and  planning  has  created.  Values  and 
assets  thus  impaired  or  destroyed  must  be  re-created, 
else  production  must  fall  behind. 

That  means  a  duplication  of  work  each  generation, 
a  waste  of  national  energy  and  effort,  and  thus  a  loss  to 
the  community. 

Moreover,  there  is  inevitably  inherent  in  inheritance 
taxation  that  element  of  social  undesirability  and  of  un- 
fairness that  it  leaves  entirely  untouched  the  wastrel 
who  never  laid  by  a  cent  in  his  life,  and  penalizes  him 
who  practiced  industry,  self-denial  and  thrift. 

And  it  cannot  be  too  often  said  that  the  encourage- 
ment of  thrift  and  enterprise,  desirable  at  all  times  from 
the  point  of  view  of  public  welfare,  has  become  of  the 
utmost  importance  under  the  circumstances  in  which  the 


I96  BUSINESS     AND      ECONOMICS 

world  now  finds  itself,  because  it  is  only  by  the  intensi- 
fied creation  of  wealth  through  savings  and  production 
that  the  world  can  be  re-established  on  an  even  keel 
after  the  ravages  and  the  waste  of  the  war. 

The  easy  assumption  in  certain  quarters  that  inher- 
itance taxation  on  large  fortunes  ought  to  be  made  so 
heavy  as  practically  to  abolish  the  bequeathing  of 
wealth  to  descendants  and  to  start  everybody  in  the 
race  of  life  more  or  less  on  the  basis  of  financial  equal- 
ity, overlooks  fundamental  and  unchangeable  facts. 

Just  as  the  purpose  of  punishment  is  to  deter,  so 
the  purpose  of  reward  is  to  stimulate.  The  com- 
munity must  stimulate  men,  and  especially  men  of  pro- 
ductive ability,  to  work  to  the  full  measure  of  the  ca- 
pacities they  possess. 

That  is  the  practice  which  men  of  large  affairs 
follow  in  the  conduct  of  their  business.  They  are 
always  on  the  lookout  for  brains  and  capacity,  and 
ready  to  give  liberal  reward  to  the  possessors  of  those 
gifts.  They  pay  the  price  willingly  because  they  know 
that  there  is  no  better  and  more  remunerative  invest- 
ment than  men  of  uncommon  ability  and  none  more 
greatly  in  demand  or  of  more  limited  supply. 

That  observation,  amply  demonstrated  by  long  ex- 
perience, holds  good  equally  as  applied  to  the  com- 
munity. 

The  point  is  emphasized  in  the  following  quotation 
from  the  very  able  speech  with  which  some  two  years 
ago  the  Canadian  Minister  of  Finance,  Sir  Thomas 
White,  introduced  in  Parliament  the  income  tax  meas- 


FAULTY     TAXATION  197 

ure  then  proposed  on  behalf  of  the  Canadian  Govern- 
ment: "We  will  need  men  of  enterprise  and  ability 
who  can  bring  capital  into  the  country  and  develop 
our  immense  resources,  and  in  reviewing  this  measure 
after  the  war,  I  think  consideration  should  be  given 
to  the  question  of  whether  the  taxation  is  so  heavy 
as  to  operate  to  prevent  men  of  that  type  from  coming 
to  this  country  and  giving  us  the  benefit  of  their  enter- 
prise and  their  capital."  * 

It  is  hardly  open  to  question  that  the  work  of  able 
men  engaged  in  serious  and  legitimate  business,  while 
naturally  of  financial  benefit  to  themselves,  benefits  to 
a  much  greater  extent  the  country  at  large.  Many 
examples  might  be  cited  in  proof  of  this. 


*  A  very  interesting  and  admirably  lucid  little  book  entitled  "Com- 
ment £quilibrer  le  Budget  de  la  France?"  has  just  come  into  my  pos- 
session. It  was  published  in  France  in  November,  1919,  by  Custos, 
this  being  the  pseudonym  of  Mr.  Francois  Marsal,  who  last  month 
entered  the  French  Cabinet  as  Minister  of  Finance.  I  am  tempted 
to  quote  at  length  from  the  observations  of  that  eminent  and  experi- 
enced economist  and  financier,  but  owing  to  considerations  of  space, 
must  confine  myself  to  reproducing  merely  the  following  few  sen- 
tences (translated  from  the  French)  : 

"A  country's  system  of  taxation  is  and  must  be  an  integral  part 
of  the  functionings  of  its  whole  system  of  economics.  To  act  in  a 
reverse  sense,  that  is,  to  set  up  measures  of  taxation  before  estab- 
lishing an  appropriate  economic  regime,  is  to  risk  failure,  to  corn- 
promise  the  development  of  the  country  and  arrest  at  their  source  the 
initiatives  of  production  .  .  . 

"We  cannot  sufficiently  emphasize  that  isolated  and  haphazard  tax 
measures  involve  the  risk  of  spoiling  everything.  Hesitation,  uncer- 
tainty, and  dislocation  result,  which  prevent  initiative,  arrest  construc- 
tive effort,  impede  the  creation  of  wealth,  and  are  damaging  to 
the  country  and  liable  to  bring  on  intolerable  conditions  for  all  the 
people,  and  especially  for  the  working  population.  The  general  sys- 
tem of  taxation  exercises  a  powerful  influence  upon  the  life  and 
economic  developments  of  a  country    .    .    . 

"The  creation  of  capital,  the  upbuilding  of  property,  and  the  trans- 
mission of  such  property  from  the  father  to  the  children,  are  corner- 
stones of  society.  The  acquisition  and  the  transmission  of  capital 
are  essential  conditions  of  progress  inasmuch  as  they  are  the  de- 
termining reasons  for  work  and  saving." 


I98  BUSINESS     AND     ECONOMICS 

In  addition  to  stimulating  them  to  effort,  the  com- 
munity must  also  make  it  worth  men's  while  to  save 
and  to  accumulate. 

It  is  a  well-known  fact  that  one  of  the  most  pow- 
erful inducements  for  men  to  work  and  save  is  the 
thought  of  those  whom  they  will  leave  behind,  and  the 
desire  for  the  perpetuation  of  that  which  they  have 
built  up. 

If  that  inducement  is  taken  away,  or  so  materially 
reduced  as  to  be  no  longer  substantial,  it  is  open  at 
least  to  serious  question  in  what  degree  saving  and 
thrift  will  cease  and  self-indulgence  take  the  place  of 
self-denial,  and  to  what  extent  men  will  fail  to  exert 
themselves  beyond  the  point  at  which  they  are  enabled, 
during  their  liyes,  to  satisfy  their  own  and  their  depen- 
dents' wants  and  desires.  An  immense  driving  force 
will  have  been  removed  from  those  elements  which 
make  the  wheels  of  the  world  go  round. 

Material  reward,  fortunately,  is  not  the  only  in- 
centive which  causes  men  to  work  and  strive,  but  it  is  a 
very  potent  incentive  undeniably. 

It  is  true,  Socialists  and  other  adherents  of  ultra- 
advanced  doctrines  claim  that  the  motive  of  social 
duty  and  service  can  be  substituted  effectively  in  or- 
dinary workaday  life  for  the  motive  of  self-interest, 
ambition  and  family,  but  such  an  allegation  runs 
counter  to  the  general  characteristics  of  human  nature 
and  is  entirely  unsupported  by  experience.  In  fact,  the 
experiment  has  been  tried  numerous  times,  and  has 
failed  invariably  and  completely. 

There  should  not  be,  and  I  am  convinced  there  need 


FAULTY     TAXATION  I99 

not  be,  unmerited  poverty  and  want  in  a  country  as 
abundantly  endowed  with  natural  resources  as  Amer- 
ica. But  the  remedy  cannot  be  found  in  discouraging, 
penalizing,  or  preventing  the  individual  accumulation 
of  capital. 

I  am  profoundly  convinced  that  we  must  leave 
nothing  undone,  within  the  limits  of  what  may  sanely 
and  safely  be  attempted,  to  equalize  opportunity  and 
to  strive  for  the  greatest  attainable  degree  of  well-being 
for  all.  The  world  must  not  and  will  not  stand  cal- 
lously by  and  permit  individuals  to  exercise  without 
restraint  such  natural  advantages  as  are  theirs,  and 
let  the  strong  bear  down  upon  the  weak. 

Every  wisely  feasible  and  really  helpful  plan  toward 
remedying  maladjustments  in  the  allocation  of  the 
monetary  reward  of  work  ought  to  be  warmly  encour- 
aged and  welcomed. 

But  the  privilege  of  handing  down  property  by  will 
is  an  essential  part  of  the  price  which  through  many 
centuries  the  community  has  found  it  well  and  useful 
to  pay  as  an  incentive  to  work  and  saving  and  self- 
denial  and  from  other  motives  of  even  more  fundamen- 
tal concern. 

And  if  the  result  is  tested  by  the  material  progress 
and  enhanced  productivity  of  the  world  and  the  in- 
creased well-being  of  the  people,  it  appears  worth  the 
price.  At  least,  no  other  means  has  as  yet  been  invented 
and  stood  the  test  of  practical  working  which  will  pro- 
duce the  same  result. 

Moreover,  if  all  the  money  left  to  the  inheritors  of 
wealth  were  to  be  divided  among  the  entire  popula- 


200  BUSINESS     AND     ECONOMICS 

tion,  the  amount  coming  to  each  one  would  be  in- 
finitesimal. And  if,  instead,  the  Government  took  it 
all,  or  most  of  it,  what  reason  is  there  to  think  that  it 
would  be  used  as  well  and  effectively  as  in  private 
hands  ? 

There  is  an  astonishing  lot  of  hazy  thinking  on  the 
subject  of  the  uses  of  capital  in  the  hands  of  its 
owners. 

The  rich  man  can  only  spend  a  relatively  small  sum 
of  money  unproductively  or  selfishly.  The  money 
that  it  is  in  his  power  to  actually  waste  is  exceedingly 
limited. 

The  bulk  of  what  he  has  must  be  spent  and  used 
for  productive  purposes,  just  as,  presumptively,  would 
be  the  case  if  it  were  spent  by  the  Government — with 
this  difference,  however,  that,  generally  speaking,  the 
individual  is  more  painstaking  and  discriminating  in 
the  use  of  his  funds  and  at  the  same  time  bolder,  more 
imaginative,  enterprising  and  constructive  than  the 
Government,  with  its  necessarily  bureaucratic  and 
routine  regime,  possibly  could  be. 

Money  in  the  hands  of  the  individual  is  continually 
and  feverishly  on  the  search  for  opportunities,  i.e.,  for 
creative  and  productive  use.  In  the  hands  of  the  Gov- 
ernment it  is  apt  to  lose  a  good  deal  of  its  fructifying 
energy  and  ceaseless  striving  and  to  sink  instead  into 
placid  and  somnolent  repose. 

It  may  be  appropriate  to  mention  in  this  connec- 
tion that  the  frequently  heard  assertion  that  the  great 
bulk  of  the  wealth  of  the  nation  goes  into  the  coffers 
of  a  small  number  of  rich  men,  is  wholly  false. 


FAULTY     TAXATION  201 

The  fact  is,  on  the  contrary,  that  about  seven-eighths 
of  our  national  income  goes  to  those  with  incomes  of 
$5,000  or  less,  and  only  about  one-eighth  to  those  hav- 
ing incomes  above  $5,000.  A  carefully  compiled  state- 
ment issued  by  the  Bankers  Trust  Company  of  New 
York  some  eighteen  months  ago  estimates  the  total 
individual  incomes  of  the  nation  for  the  fiscal  year  end- 
ing July  30,  1919,  at  $53,000,000,000,  and  finds  that 
families  with  incomes  of  $5,000  or  less  receive  $46,- 
000,000,000  of  that  total. 

It  is  not  true  that  under  our  economic  and  social 
system  "the  rich  are  getting  richer  and  the  poor  poorer." 
On  the  contrary,  the  diffusion  of  wealth  has  been  going 
on  apace;  the  trend  of  things  within  the  past  twenty 
years  has  been  greatly  toward  diminishing  the  differ- 
ence in  the  standard  and  general  way  of  living  between 
the  various  categories  of  our  population.  And  our 
wealthiest  men  are  not  those  who  inherited  their  pos- 
sessions, but  those  who  started  at  the  bottom  of  the  lad- 
der. 

In  taking  leave  of  this  subject  which,  to  be  dealt 
with  adequately,  would  require,  as  I  have  said  before, 
far  more  exhaustive  treatment  than  I  can  give  it  in 
these  pages,  I  should  like  only  to  add  this : 

The  eternal  law  of  compensation  works  in  mysterious 
ways.  It  is  unquestionably  a  fact  that  it  is  not  the 
children  of  the  rich  to  whom  life  yields  the  greatest 
measure  of  joy  and  satisfaction  and  reward. 


202  BUSINESS     AND      ECONOMICS 

IV 

For  a  country  as  immensely  rich  and  intrinsically 
as  little  burdened,  relatively,  as  ours,  it  is  really  not 
a  problem  of  great  difficulty  to  raise,  by  taxation, 
the  sum  which  the  needs  of  the  occasion  require. 

We  have  raised  in  taxes  about  one-third  of  our 
total  governmental  expenditures  in  the  two  war  years 
(excluding  loans  to  allied  nations). 

Indeed,  if  we  deduct  from  "current"  expenditures  the 
amount  spent  for  investments  of  permanent  value,  such 
as  ships,  shipyards,  stocks  of  the  War  Finance  Cor- 
poration, etc. — as  any  business  man  would  in  making 
up  his  balance  sheets — we  find  that  we  have  raised  by 
taxation  more  than  40%  of  the  Government's  total  ex- 
penditures during  the  war. 

That  is  a  stupendous  achievement,  which  no  other 
nation  has  come  near  paralleling.  I  am  convinced  that 
during  the  war  it  was  wise  and  advantageous  to  resort 
to  taxation  to  the  extent  we  did,  but  I  think  that  the 
necessity,  and  with  it  the  advisability  of  imposing  taxes 
of  extreme  magnitude  has  gone  by  with  the  passing  of 
the  war,  and  that  the  disproportionate  burdening  of  the 
present  generation  to  enable  unduly  rapid  extinction  of 
our  war  debt,  would  be  both  an  injustice  and  a  mis- 
take. 

Certainly  our  taxation  of  business  and  capital  ought 
not  to  be  any  heavier  than  that  of  our  chief  competi- 
tor, Great  Britain,  in  any  part  of  its  scale  (our  income 
tax  is  now  considerably  heavier  in  its  upper  scale  and 
50%  heavier  in  its  maximum  scale,  and  our  excess 


FAULTY      TAXATION  20,3 

profit  tax  is  considerably  more  burdensome  than  the 
analogous  tax  in  England). 

Rather,  our  taxes  on  business  and  capital  ought  to 
be  less  heavy  than  these  taxes  are  in  England,  because 
that  would  aid  us  in  holding  our  own  in  the  competition 
for  world  trade ;  and  it  should  be  easily  feasible  to  make 
them  so,  for  our  population  is  twice  as  numerous  and 
our  wealth  much  more  than  twice  as  great  as  that  of 
Great  Britain,  and  the  financial  war-burden  which  we 
have  to  take  care  of  is  much  less  than  that  of  Great 
Britain. 

It  should  be  easily  feasible  without  in  any  way  im- 
pairing the  fortunate  and  desirable  position  that  in  our 
country  those  of  small  or  moderate  means  are  taxed  far 
less,  both  in  direct  and  indirect  taxation,  than  they  are 
in  any  other  of  the  leading  countries.  The  alternative 
is  not  to  burden  unduly  either  business  or  the  people. 
The  idea  is  not  of  relieving  the  former  at  the  expense 
of  the  latter.  The  end  which  should  and  can  be  at- 
tained by  proceeding  wisely,  is  to  benefit  both  business 
and  the  people. 

Now  that  the  emergency  of  the  war  is  over,  I  be- 
lieve that  this  subject  in  its  entirety  should  be  sub- 
jected to  unprejudiced  and  competent  critical  review. 
Good  intentions  are  not  a  sufficient  qualification  for  the 
task  of  devising  a  plan  and  methods  of  taxation  to  bal- 
ance our  vast  expenditures.  Exact  thinking  is  required, 
technical  capacity,  adequate  knowledge  and  the  courage 
not  to  shrink  from  unpalatable  conclusions.  Economics 
are  stubborn  things  and  will  not  permit  themselves  to 


204  BUSINESS     AND     ECONOMICS 

be  either  disregarded  or  overridden  or  dealt  with  emo- 
tionally. 

In  England  a  non-political  committee  was  appointed 
recently  by  the  Government  to  study  the  effects  of  the 
various  kinds  of  taxes  which  have  been  in  force  during 
the  past  five  years,  and  to  make  recommendations  to 
Parliament  based  upon  such  study.  It  seems  to  me  that 
similar  action  by  Congress  or  the  President  would  be 
wise  and  timely. 

A  small  committee  of  well-informed  men  of  different 
callings,  approaching  their  task  free  from  political, 
social  and  sectional  bias,  would  not  find  it  a  formidable 
undertaking  to  evolve  a  measure  which,  while  fully  re- 
sponsive to  the  dictates  of  equity  and  social  justice, 
would  produce  no  less  revenue  than  the  taxation  now 
in  force,  and  yet  would  be  far  less  burdensome  upon 
the  country,  less  hampering  to  enterprise,  and  less  pro- 
ductive of  economic  disturbance  and  dislocation. 

Such  a  committee  would  not  be  unmindful  of  the 
manifest  propriety  of  grading  the  burden  of  taxation 
as  much  as  practicable  according  to  capacity  to  bear  it. 

But  neither  would  it  be  unmindful  of  ways  of  easily 
collectible,  easily  borne  taxation,  which  we  have  failed, 
thus  far,  to  utilize.  Nor  would  it  look  upon  material 
success  as  something  akin  to  guilt  and  therefore  to  be 
visited  with  punitive  treatment. 

It  might  recommend  a  radical  revision  of  income 
taxation  on  the  theory  that  the  emphasis  of  taxation 
be  laid  rather  on  expenditures  than  on  incomes  and 
that  a  sharply  marked  distinction  be  made  between 
such  portion  of  a  person's  income  as  is  used  construe- 


FAULTY     TAXATION  2(3$ 

tively  in  savings,  investments,  or  enterprise  and  such 
portion  as  is  spent  on  his  scale  of  living.  A  tax  based 
on  that  theory  would  be  calculated  and  paid  at  the  end 
of  a  twelve  months'  period,  just  as  the  income  tax.  It 
would,  no  doubt,  exempt  expenditures  of  a  certain 
minimum  sum  per  annum,  say,  $2,500  for  single  and 
$4,000  for  married  persons,  would  be  applied  mod- 
erately to  moderate  expenditures,  and  would  be  se- 
verely progressive  on  large  expenditures. 

Much  can  be  said  for  such  a  tax  from  both  the  eco- 
nomic and  moral  points  of  view.  Among  other  desir- 
able effects,  it  would  reach  those  who,  by  holding  tax- 
exempt  securities,  now  escape  the  burden  of  income 
taxation,  and  it  would  thus  go  a  long  way  to  eliminate 
the  undue  advantage  now  attaching  to  tax-exempt  se- 
curities and  to  correct  the  resulting  evils  which  I  have 
pointed  out  before  in  discussing  that  phase  of  our  tax 
problem. 

While  a  tax  of  this  nature  involves  certain  com- 
plexities in  its  details  and  working,  they  would  by  no 
means  be  insuperable;  in  fact,  they  would,  I  think,  be 
less  formidable  than  those  of  the  present  income  tax. 

The  Committee  might  also,  I  should  think,  reach  the 
conclusion,  quite  irrespective  of  the  theory  suggested  in 
the  foregoing  paragraphs,  to  recommend  the  imposition 
of  a  small  percentage  tax,  say  1  %,  on  all  sales  of  com- 
modities and  products  and  presumably  of  real  estate. 
Such  a  measure  would  be  productive  of  an  immense 
amount  of  revenue  and  would  not  be  harmful  to  any 
one. 

A  similar  tax  was  imposed  in   the  course  of  our 


206  BUSINESS     AND     ECONOMICS 

Civil  War  and  appears  to  have  functioned  so  well  and 
to  have  met  with  such  ready  acceptance  that  it  was  not 
repealed  until  several  years  after  the  close  of  that 
war. 

The  exact  form  which  such  a  tax  should  take  is 
debatable.  It  might  be  imposed  on  the  seller  accord- 
ing to  the  aggregate  sales  effected,  the  tax  to  be  com- 
puted quarterly,  semi-annually  or  annually.  Or,  it 
might,  on  every  transaction,  be  paid  by  the  purchaser, 
in  which  case  it  should  not  be  included  in  the  selling 
price,  but  specifically  added  to  it  as  a  separate  item, 
probably  best  in  the  shape  of  stamps.  Or,  it  might  be 
made  applicable  to  retail  sales  only. 

In  the  latter  case,  it  might  be  found  well  to  exempt 
from  the  tax  single  purchases  below  $2.  Also  in  that 
case,  i.e.,  in  dealing  with  the  ulitmate  purchaser,  it 
might  possibly  be  deemed  appropriate  to  make  the  tax 
varying  in  its  scale,  say  from  l  %  to  10%,  or  even  20%, 
progressing  according  to  the  value  of  the  article  pur- 
chased, so  that,  for  instance,  a  person  making  a  $5 
purchase  would  pay  l  %  tax,  i.e.,  five  cents,  while  a 
person  making  a  $5,000  purchase  would  pay  10%,  i.  e., 
$500,  and  so  on. 

While  the  progressive  scale  suggested  would  be  at' 
tractive  from  the  point  of  view  of  equity,  I  realize,  of 
course,  the  practical  objections  to  which  it  is  open  and 
the  difficulty  of  its  operation.  Indeed,  it  may  be  found 
upon  due  investigation  that  the  complications  involved 
would  be  such  as  to  be  decisive  against  the  adoption 
of  that  suggestion. 

The  simplest  and  most  remunerative  way,  naturally, 


FAULTY      TAXATION  20~J 

would  be  to  impose  a  very  small  tax  on  the  turnover, 
computed  quarterly  or  semi-annually,  of  sales  of  com- 
modities and  products  all  along  the  line,  from  first  to 
last. 

At  any  rate,  whatever  may  be  the  differences  of  opin- 
ion as  to  the  various  ways  of  applying  a  sales  tax,  I 
feel  confident  that  as  far  as  the  principle  of  such  a  tax 
is  concerned,  a  great  majority  of  the  men  engaged  in 
business  large  or  small  would  welcome  it. 

If  the  Ways  and  Means  Committee  of  Congress 
were  to  consult  on  the  subject  with  duly  qualified  rep- 
resentatives of  business  associations  and  agricultural 
and  other  organizations,  no  great  difficulty  should  be 
found  to  devise  the  best,  most  productive  and  least 
troublesome  way  and  method  by  which  a  tax  of  that 
general  nature  should  be  made  operative. 

It  may  be  objected  that  such  a  tax  is  finally  passed 
on  to  the  consumer.  No  doubt  it  is.  So  is  the  bulk  of 
the  excess  profit  tax.  So,  in  the  end,  is  practically  every 
business  tax  and,  to  a  great  extent,  even  individual 
taxes. 

And  the  burden  on  the  consumer  is  always  cumula- 
tive, inasmuch  as  almost  every  article  before  it  comes 
to  him  passes  through  several  different  handlings  in 
the  process  of  being  converted  from  the  raw  material 
to  the  finished  article  on  sale,  and  each  one  of  those 
concerned  in  that  process  seeks  to  add  to  the  price  a 
proportionate  percentage  to  cover  his  taxes,  at  least  in 
part. 

Nor  is  he  justly  subject  to  reproach  for  doing  so,  in 
most  cases.     He  is  simply  acting  from  necessity,  be- 


2o8  BUSINESS     AND     ECONOMICS 

cause,  as  I  have  indicated  before,  what  the  existing 
profit  tax,  as  well  as  the  income  surtax  absorbs,  "is  that 
essential  necessity  for  the  conduct  of  business — cash."  * 

The  sales  tax  would  aggregate  a  far  smaller  burden 
by  the  time  it  reaches  the  consumer  than  our  prevailing 
array  of  taxes.  It  would  weigh  far  more  lightly  on  the 
rank  and  file  than  do  the  results  of  our  existing  taxa- 
tion. 

At  present,  apart  from  various  minor  taxes,  corpo- 
rate business  pays  10%  income  tax  and,  in  addition, 
excess  profit  taxes  up  to  40%.  Individuals  pay  up  to 
73%  in  Federal  income  taxes  alone. 

A  trifling  sales  tax  on  the  huge  volume  of  commod- 
ities changing  hands  annually  would  yield  so  vast  a 
revenue  that  it  would  enable  the  excess  profit  tax  and 
practically  all  other  abnormal  business  taxes  (except 
perhaps  the  corporate  income  tax)  to  be  eliminated, 
surtaxes  on  individual  incomes  to  be  greatly  reduced, 
and  Federal  taxation  of  incomes  up  to,  say,  $4,000  to 
be  abolished  altogether. 

The  result  would  be  a  great  reduction  in  the  cumula- 
tive percentages  with  which  prices  are  now  "loaded" 
to  meet  taxation,  that  is  to  say,  there  would  be  bound 
to  ensue  a  lowering  of  prices  all  round.  Competition 
would  see  to  that.  If,  contrary  to  all  expectation  and 
precedent,  it  should  not  do  so,  other  agencies  will. 

Another  advantage  of  the  sales  tax  is  the  great  sim- 
plicity of  its  working  and  the  definiteness  of  its  appli- 
cation, especially  as  compared  to  the  vexatious,  un- 
even and  unfair  working  of  the  excess  profit  tax. 

*  See  page  172,  line   17   and  on. 


FAULTY     TAXATION  209 

Furthermore,  to  collect  such  a  tax  requires  little  ex- 
pense, no  complicated  bookkeeping,  no  intricate  sched- 
ules, no  lawyers'  and  accountants'  services,  and  no  army 
of  Government  employees.  It  can  be  increased  or  de- 
creased in  short  order  and  without  any  resulting  eco- 
nomic disturbance,  according  to  the  financial  needs  of 
the  Government. 

If  a  l  %  tax  produces  too  much,  it  is  a  very  simple 
process  to  decrease  it  by  an  appropriate  percentage. 
If  it  produces  too  little,  a  small  additional  percentage 
will  yield  the  sum  needed. 

We  have  had  a  two-years'  test  now  of  a  scheme  for 
raising  revenue,  which  is  unscientific,  inconsistent  and 
ill-designed  and  has  as  its  principal  characteristic  the 
taxation  of  business  and  constructively  employed  cap- 
ital on  a  scale  without  a  parallel  anywhere.  The  result 
is  writ  large  in  the  high  cost  of  living,  industrial  and 
economic  dislocation  and  social  discontent — for  all  of 
which  our  taxation  policy  is  a  strongly  contributory, 
though,  of  course,  not  the  sole,  cause. 

In  common  with  all  right-thinking  men,  I  desire 
very  earnestly  and  sincerely  to  see  the  burdens  of  the 
poor  and  those  of  moderate  means  lightened  to  the 
utmost  extent  possible. 

I  realize  but  too  well  that  the  load  weighing  upon 
those  whose  income  has  not  kept  pace  with  the  in- 
creased cost  of  things  has  become  almost  intolerable. 
I  welcome  every  means  compatible  with  sober  reason 
and  the  test  of  experience  and  with  national  welfare,  to 
remedy  that  situation,  or  at  least  to  mitigate  it  to  the 
limit  of  our  ability. 


210  BUSINESS     AND     ECONOMICS 

But  I  am  entirely  convinced  that  crushing  and  bun- 
gling taxation  of  capital  and  industry  is  not  the  way 
to  accomplish  that  result.  I  am  convinced,  on  the  con- 
trary, that  such  taxation  is  bound  to  redound  to  the 
detriment  of  all  the  people. 

If  our  extreme  surtaxes  on  incomes,  and  our  excess 
profit  tax  had  the  effect  of  breaking  the  vicious  circle 
of  price-boosting  and  wage-boosting,  if  these  taxes  had 
power  to  eliminate  or  curb  "profiteering,"  much  might 
be  forgiven  them. 

But  experience  has  proved  that  not  only  have  they 
no  such  effect  and  no  such  power,  but  indeed  they  have 
tended  to  greatly  intensify  those  evils.  To  deal  with 
these  noxious  things,  measures  of  quite  a  different  na- 
ture are  required. 


I  know  the  political  mind  shies  from  laying  hands 
on  the  presumably  popular  structure  of  huge  super- 
taxes on  incomes  and  profits.  But  I  venture  to 
think  that  the  political  mind  is  once  more  acting  ac- 
cording to  its  inveterate  habit  of  underestimating  both 
the  integrity  and  the  intelligence  of  the  people. 

Twenty  odd  years  ago  Mr.  Bryan,  acting,  I  am  cer- 
tain, from  true  conviction  and  in  absolute  good  faith, 
offered  to  the  people  a  scheme  which  they  were  led  to 
believe  would  practically  cut  their  debts  in  half,  en- 
hance greatly  the  price  of  farm  products,  then  at  low 
ebb,  increase  wages  largely,  and  bring  about  other  re- 
sults strongly  appealing  to  selfish  interest.  No  more 
tempting  lure  was  ever  held  out  to  the  popular  vote. 


FAULTY     TAXATION  211 

It  took  the  Republican  party  managers  a  long  while 
before  they  mustered  courage  to  meet  the  issue  squarely 
and  to  come  out  flatfootedly.  However,  they  did  final- 
ly and  Mr.  Bryan's  challenge  was  met  by  a  most  in- 
tensive campaign  of  education  and  information.  In- 
tricate questions  of  economics  and  currency  were  dis- 
cussed and  debated  up  and  down  the  land. 

The  result  was  that  a  great  majority  of  the  people 
recognized  the  faultiness  of  Mr.  Bryan's  program  and 
rejected  it. 

When  the  pros  and  cons  of  a  proposition,  of  what- 
ever nature,  have  been  set  fully  and  plainly  before  them 
the  great  majority  of  the  American  people  can  be 
trusted  to  form  right  and  just  conclusions,  and  to  re- 
ject fallacies,  however  appealing,  plausible  and  tempt- 
ing. 

The  facts  as  to  the  harm  and  futility  of  our  existing 
revenue  measures  are  indisputable  and  easily  explained 
and  demonstrated.  It  is  for  us  business  men  to  bestir 
ourselves  and  see  that  these  facts  are  brought  to  the  at- 
tention of  the  people  duly  and  effectively. 

The  average  man  and  woman  are  amply  capable  of 
grasping  them,  and  they  will  be  found  entirely  ready 
to  see  stark  unfairness  remedied  and  damaging  errors 
corrected. 

The  legitimate  rights  of  property,  subject  of  course 
to  the  reasonable  and  proper  exercise  of  the  superior 
rights  of  the  community,  are  among  those  elements  the 
sum  total  of  which  makes  up  liberty  in  its  true  mean- 
ing. 

It  is  not  a  "standpatter's"  phrase,  but  a  sober  fact 


212  BUSINESS     AND     ECONOMICS 

that  liberty  and  ordered  progress  presuppose  respect 
and  protection  for  the  property  rights  of  the  individual, 
within  those  bounds,  naturally,  which  are  inherent  in 
wise  and  enlightened  regard  for  the  public  welfare. 

The  principle  of  the  rights  of  private  property  is 
one  of  the  pillars  of  the  structure  of  liberty,  as  liberty 
was  always  understood  in  America,  and,  I  am  sure,  is 
still  understood  by  the  overwhelming  majority  of  Amer- 
icans. You  cannot  seriously  weaken  one  pillar  of 
that  structure  without  weakening  the  whole. 

Economics,  the  laws  of  finance,  the  functions  of  cap- 
ital, the  problems  of  trade,  etc.,  are  complex  and  dif- 
ficult subjects.  They  lend  themselves  all  too  easily  to 
plausible  fallacies  and  to  demagogic  misinformation. 

The  rank  and  file  cannot  be  expected  to  have  ac- 
quainted themselves  with  the  lessons  of  either  history 
or  textbooks  on  these  subjects,  or  to  know  the  teachings 
of  practical  experience  concerning  them.  They  should 
not  be  expected  unaided  to  "dope  out"  these  complex 
things  for  themselves  to  their  correct  and  tested  solu- 
tion. They  should  not  be  expected  to  discover  entirely 
out  of  their  own  brains  arguments  to  offset  the  cleverly 
and  persistently  presented  half-truths  or  untruths  of  the 
demagogue  or  the  Socialist  or  other  varieties  of  the 
Utopian  or  extremist  fraternity. 

Nor  can  nor  should  they  be  expected  to  accept  exist- 
ing practices  or  the  mere  affirmations  of  business  men, 
as  conclusive  upon  their  own  mental  processes. 

It  is  one  of  the  proper  and  indeed  necessary  functions 
of  organization  of  business  men  to  spread  information 
on  such  matters  among  the  people,  to  give  facts  and 


FAULTY      TAXATION  213 

figures  and  reasons,  to  defend,  justify  and  explain,  and 
to  meet  pernicious  agitators  on  their  own  ground  of 
propaganda. 

It  is  a  function  which  is  far  too  little  exercised  as 
yet  and  the  necessity  for  which  is  becoming  steadily 
more  apparent  and  more  urgent. 

The  enemies  of  the  existing  social,  economic  and 
governmental  order  are  at  work  incessantly,  under  skil- 
ful and  none  too  scrupulous  leadership,  with  great  in- 
genuity and  cunning  to  instill  into  the  minds  of  the 
people  the  poison  of  class  animosity,  by  misrepresenting 
facts  and  conditions  and  promising  the  unattainable. 

We  must  not  put  our  heads  into  the  sand  in  the  face 
of  these  machinations,  nor  must  we  be  in  fear  of  them, 
or  permit  ourselves  to  be  unduly  wrought  up.  We  can- 
not meet  them  by  blunt  denials  or  by  calling  hard 
names,  or  by  harsh  actions,  or  even  by  appeal  to  the 
flag  and  the  Constitution.  Indeed,  we  must  be  particu- 
larly careful  not  to  create  the  impression  that  patriotism 
is  used  pharisaically  as  a  cloak  for  smug  self-interest 
and  the  protection  of  privilege. 

The  way  to  meet  wrongful  agitation  is  first  by  sin- 
cere and  persistent  efforts  to  eliminate  causes  for  just 
discontent,  and  secondly  by  an  organized  and  unre- 
mitting campaign  of  education  and  information  con- 
ducted in  the  spirit  of  sympathy,  patience,  under- 
standing and  of  respect  for  differing  viewpoints. 

We  must  seek  to  bring  truth  and  enlightenment  into 
the  ring  against  falsehood  and  error,  and  then  let  them 
have  it  out  in  the  presence  of  the  American  people.  I 
have  no  fear  of  the  result. 


THE  NEED  FOR  NATIONAL 
EFFICIENCY 


w 


E  are  at  war  with  a  people  which  through  years 
of  preparation  has  not  only  developed  the  most 
formidable  military  machine  ever  created,  but  which 
is  held  together  by  close  national  cohesion  and  main- 
tained, as  yet  unbroken,  by  nationally  organized  ef- 
ficiency. 

The  courage,  valor  and  fighting  capacity  of  the  gal- 
lant youth  of  our  land  will  meet,  and  meet  triumphant- 
ly, the  grim  test  before  them,  as  American  daring  and 
determination  have  met  many  a  test  before.  We,  to 
whom  it  is  not  given  to  face  our  country's  foe,  arms  in 
hand,  have  a  threefold  task  to  fulfil,  less  glorious  but 
hardly  less  important.  That  task  is  to  serve,  to  spend 
ourselves  without  stint,  to  bear  sacrifices  without  limit; 
it  is  to  strive  with  our  utmost  power  for  national  ef- 
ficiency and  it  is  to  fight  with  stern  determination  all 
influences  which  would  undermine  the  national  will  and 
weaken  national  unity. 

There  is  one  searching  question,  which  each  one  of 
us  must  ask  himself  daily,  and  that  is :  "Am  I  doing 
enough*?" — not  "Am  I  doing  as  much  or  more,  rela- 

An  address  at  Chicago,  January  12,  1918. 

214 


NEED    FOR    NATIONAL    EFFICIENCY       215 

tively,  than  the  next  man  or  the  next  class  of  men,  the 
farmer,  the  laborer  or  whatever  other  class?"  not  "Is  the 
next  man  or  class  of  men  doing  all  he  or  they  ought  to 
do?"  but  "Am  I  individually  doing  everything,  literally 
everything,  in  my  power  to  serve  and  to  aid,  not  merely 
by  giving,  but  also  by  thinking  and  working?" 

We  who  are  not  privileged  to  bear  arms  for  our 
country — the  men  too  old  to  fight,  the  boys  too  young 
to  fight,  the  women  and  girls  not  called  upon  to  fight, — 
we  must  have  one  watchword,  one  resolve  beyond  all 
others  till  our  boys  return  in  victory,  and  that  is  sac- 
rifice and  service.  Let  that  be  the  controlling  impulse 
of  our  actions  and  thoughts,  so  that  our  sons  and 
brothers  may  not  lack  for  anything  which  it  is  in  our 
power  to  give  or  procure,  so  that  our  country  may  not 
fail  in  anything  within  the  utmost  limits  of  our  means, 
to  insure  and  hasten  victory. 

But,  just  as  bravery  alone  will  not  win  battles,  so 
the  most  willing  and  universal  patriotic  devotion  is 
merely  a  part  of  what  is  required  to  lead  our  cause  to 
victory.  This  war  is,  to  a  very  large  extent,  a  test  of 
organizing  ability  and  industrial  power.  On  that  field 
of  battle,  the  experience  and  training  of  business  men 
entitle  their  voices  to  be  heard.  They  must  not  be 
raised,  of  course,  in  carping  or  partisan  criticism.  But 
we  may  fulfil  a  useful  function  by  seeking  to  ascertain 
facts,  to  point  out  errors  and  shortcomings,  to  sug- 
gest remedies,  to  offer  constructive  advice. 

Many  things  have  been  done  exceedingly  well  since 
our  country  entered  the  war,  some  others  badly.  There 
is  no  reason,  given  the  intelligence  and  adaptability  of 


2l6  BUSINESS     AND     ECONOMICS 

our  people,  why  at  least  as  high  an  average  of  ef- 
ficiency in  every  domain  of  war  effort  and  manage- 
ment should  not  be  reached  and  maintained  by  America 
as  by  any  other  belligerent  nation. 

It  must  be  recognized,  and  generous  allowance  must 
be  made  for  the  fact,  that  the  task  thrust  upon  those 
who  are  handling  the  multifarious  affairs  of  the  nation 
at  this  juncture  is  one  of  immense  complexity,  difficulty 
and  vastness.  They  cannot  listen  to  all  of  us  individ- 
ually, but  they  could  and  doubtless  would  willingly 
give  ear  and  due  weight  to  the  reasoned  and  matured 
views  of  the  business  community  expressed  through  a 
representative  National  War  Committee,  organized  to 
aid  in  promoting  efficiency. 

Equal  in  importance  to  industrial  effort  is  economic 
power  and  endurance.  There,  again,  is  a  great  task 
calling  for  business  to  make  its  thoughts  articulate  and 
effective  through  an  organized  agency.  Wherever  and 
whenever  a  great  upheaval  takes  place  in  the  world  it 
brings  to  the  surface  economic  error,  social  fallacies, 
quack  remedies  and  nostrums,  the  true  character  and 
effect  of  which  often  are  not  recognized  till  they  have 
brought  suffering  and  privations  upon  the  people  and 
the  old  lessons  have  been  learned  again  in  the  school  of 
bitter  experience. 

It  is  too  much  to  hope  that  in  the  formidable  crisis 
through  which  the  nations  are  passing  and  the  effect  of 
which  will  be  felt  for  many  years  to  come,  we  shall 
escape  the  militant  manifestation  of  such  tendencies 
and  the  onslaught  of  their  exponents.  In  the  face  of 
them  we  should  maintain  and  assert  business-like  so- 


NEED    FOR    NATIONAL    EFFICIENCY       217 

briety  of  judgment,  should  refuse  to  be  stampeded  and 
should  meet  with  reasoned  and  resolute  opposition  the 
counsels  and  proposals  of  the  scheming  demagogue  or 
well-meaning  utopianist,  presented  and  urged  as  they 
probably  will  be  under  the  guise  of  war  or  reconstruc- 
tion necessities. 

Individually,  each  one  of  us  must  work  and  think 
doubly  hard,  consider  ourselves  and  our  business  pri- 
marily as  parts  of  the  great  national  war  machinery, 
and  do  our  utmost  to  eliminate  lost  motion  and  waste. 
Then,  we  must  be  of  steady  nerve,  not  lose  heart  when 
things  don't  go  right  and  the  outlook  seems  confused 
or  gloomy,  but  grit  our  teeth  and  plod  on,  and,  above 
all,  never  lose  faith  in  our  country  and  its  people. 

The  man,  for  instance,  who  without  actual  and  im- 
perative cause,  throws  his  holdings  of  stocks  or  bonds 
on  an  adverse,  highly  sensitive  and  disturbed  market 
(such  as  was  the  market  for  securities  recently),  hurts 
himself  and  hurts  his  country.  He  helps  to  break 
down  values,  he  aids  in  causing  disturbance  in  financial 
affairs,  which  tends  to  react  on  business  in  general,  and 
he  diminishes  the  capacity  of  the  community  to  respond 
to  the  Government's  call  for  funds. 

If  every  one  took  counsel  from  his  fears — as  too 
many  appear  to  have  done  in  recent  months — and 
rushed  in  selfish  and  panicky  haste  to  "stand  from  un- 
der," we  should  soon  be  at  the  end  of  our  rope.  In 
war  time  the  man  who  is  a  coward  in  the  face  of  the 
enemy  is  shot.  Moral  courage  at  home  is  just  as  neces- 
sary for  winning  the  war  as  physical  courage  at  the 
front.      The   financial   coward,    the   calamity-howler, 


2l8  BUSINESS      AND      ECONOMICS 

should  be  awakened  to  a  sense  of  shame  and  guilt  by  the 
stern  voice  of  public  opinion. 

The  wastage  of  war  is  enormous,  but  most  of  the 
money  the  Government  spends  is  used  at  home,  and  the 
temporary  burden  can  be  borne  without  causing  too 
great  a  strain  provided  we  all  bend  our  backs  to  it 
and  the  load  is  not  too  unwisely  adjusted  by  our  legis- 
lators. 

In  many  ways  we  are  establishing  national  assets 
of  the  greatest  value.  We  are  creating  for  ourselves 
world-aspects  and  a  world-position  such  as  we  never 
had  before.  We  have  become  a  creditor  nation.  We 
are  scrapping  and  overhauling  and  inventing.  And  the 
nation  is  learning  the  lesson  of  co-operation,  and  the 
no  less  valuable  and  needed  lesson  of  economizing. 

Unless  we  make  grave  mistakes  of  omission  or  com- 
mission, we  have  a  right  (after  the  temporary  disturb- 
ance probably  incidental  to  readjustment  from  a  war 
to  a  peace  basis)  to  look  for  a  period  of  great  prosperity 
and  auspicious  achievement  after  the  war;  I  believe  we 
shall  all  be  surprised  to  see  with  what  ease  the  nation 
will  be  able  to  carry  the  burdens  which  we  shall  have 
inherited  from  our  war  expenditures — always  provided 
that  our  house  is  ordered  with  reasonable  wisdom  by 
those  in  authority. 

No  doubt,  serious  and  complex  problems  must  be 
solved,  both  while  the  nation  is  at  war  and  in  the  period 
of  reconstruction  and  readjustment  which  will  set  in 
with  the  coming  of  peace.  No  doubt,  these  problems 
will  test  our  wisdom  and  foresight.  But  I  am  entirely 
convinced  of  our  ability  to  meet  the  situation  success- 


NEED    FOR    NATIONAL    EFFICIENCY       219 

fully  if  we  mobilize  the  brain  power  of  the  nation,  and 
if  due  weight  is  accorded  to  the  experience  and  matured 
judgment  of  the  spokesmen  of  business,  and  if,  while 
recognizing  and  respecting  the  demands  of  progress 
and  social  justice,  we  do  not  venture  too  far  into  un- 
charted waters. 

II 

It  seems  to  me  that  it  would  serve  a  useful  purpose 
if  out  of  the  various  executive  commissions  now  deal- 
ing with  economic  affairs,  or  as  a  separate  body  suitably 
co-ordinating  with  them,  the  President  or  the  Secre- 
tary of  the  Treasury  were  to  see  fit  to  appoint  a  Board 
of  Economic  and  Financial  Strategy — just  as  the  Army 
and  Navy  have  boards  of  experts  to  elaborate  and  deal 
with  strategic  problems. 

It  would  be  the  function  of  such  a  Board  to  study 
carefully  the  exigencies  both  of  our  immediate  situation 
and  of  the  conditions  likely  to  confront  us  after  the 
war.  It  would  correlate  activities  now  more  or  less 
scattered,  and  might,  if  so  desired,  act  as  a  bureau  to 
furnish  to  Congress  centralized  and  systematized  in- 
formation on  economic  subjects. 

It  would  prepare  a  comprehensive  plan  for  the  mar- 
shalling and  intensive  utilization  of  our  potential  and 
actual  resources,  both  during  war  times  and  afterward. 
It  would  scan  the  trade  and  commerce  of  the  world, 
and  might  usefully  place  itself  into  communication 
with  the  various  Reconstruction  Committees  and  kin- 
dred bodies  in  the  allied  countries. 

At  present  I  know  of  no  one  governmentally  ap- 


220  BUSINESS     AND     ECONOMICS 

pointed  body  here  charged  specifically  with  the  task  of 
studying  and  advising  on  industrial  and  economic  post- 
bellum  problems.  England,  France,  Germany  and 
Italy  have  such  bodies  at  work.  There  is  every  expec- 
tation that  we  shall  emerge  from  the  war  in  a  position 
of  commanding  economic  potency  and  prestige.  But  in 
order  to  retain  that  position  and  fully  to  utilize  it  for 
our  country's  welfare,  we  must  be  ready  to  act  along 
well-planned  lines  and  with  suitable  instruments  at  our 
hands.    It  is  none  too  soon  to  prepare. 

Among  the  immediate  and  important  functions  which 
such  a  body  could  perform,  at  once,  would  be,  for  in- 
stance, to  give  direction  to  the  necessary  general  cam- 
paign of  saving  (apart  from  the  specific  task  of  arousing 
the  nation  to  invest  in  Thrift  Certificates). 

We  must  all  save,  rich  and  poor.  But  thrift  con- 
sists not  merely,  or  even  mainly,  in  putting  one's  sav- 
ings into  the  Savings  Bank  or  War  Savings  Certificates 
or  other  sound  investments. 

Indeed,  the  investing  of  savings  is  really  only  the 
utilization  of  the  product  of  thrift;  it  is  not  in  itself 
what  can  properly  be  termed  "thrift."  The  essential 
thing  in  thrift  is  the  continuous  practice  of  sane  econ- 
omy, of  avoiding  useless  or  wasteful  expenditures,  of 
careful  housekeeping  by  individual  family  and  busi- 
ness in  every-day  life. 

That  is  not  as  simple  and  easy  as  it  may  seem.  It 
requires  teaching  and  guidance.  A  general  exhortation 
to  be  thrifty  is  not  enough.  Some  qualified  agency 
ought  to  exist,  not  only  to  conduct  a  persistent  propa- 


NEED    FOR    NATIONAL    EFFICIENCY       22 1 

ganda  to  encourage  saving,  but  to  indicate  how,  where 
and  in  what  way  to  save.  If  necessary,  the  most  es- 
sential of  such  indications  might  even  receive  the  force 
of  law  for  the  duration  of  the  war.  Some  savings 
are  more  needed,  and  more  effective  than  others.  Some 
are  wiser  and  more  desirable  than  others.  Numerous 
savings  are  practicable  which  really  involve  no  depriva- 
tion at  all. 

Thrift,  as  particularly  the  example  of  France  has 
demonstrated,  is  a  national  asset  of  the  greatest  value. 
It  is  astounding  how  great  is  the  effect  of  a  multiplicity 
of  savings,  and  conversely  of  a  multiplicity  of  extrava- 
gance.   The  effect  is  cumulative  one  way  or  the  other. 

In  addition  to  the  general  desirability  and  national 
utility  of  thrift,  there  is  one  particular  aspect  which 
further  emphasizes  the  duty  and  national  advantage 
of  saving  while  the  nation  is  at  war.  If  the  individual 
abstains  from  unnecessary  purchases,  he  contributes  to 
that  extent  to  set  labor  free  from  private  purposes  to 
war  purposes. 

How  to  direct  and  utilize  the  labor  thus  set  free  by 
private  thrift,  is  the  task — and  a  highly  important  task 
— of  the  Government.  As  the  lessons  of  economy  are 
more  fully  learned  or  enforced  and  practiced,  the  ag- 
gregate of  labor  released  by  that  process  will  amount  to 
a  very  large  total.  I  do  not  know  that  any  one  govern- 
mental agency  is  now  charged  with  the  handling  of  this 
weighty  matter  and  effectively  organized  and  equipped 
to  do  so,  though  I  believe  a  measure  having  this  end  in 
view  has  been  introduced  in  Congress. 


222  BUSINESS      AND     ECONOMICS 


III 

We  are  fighting  the  most  perfectly  organized  ma- 
chine the  world  has  ever  seen.  Democracy  has  a  not 
undeserved  reputation  for  blundering  and  for  scatter- 
ing or  misdirecting  its  energies.  To  meet  successfully 
the  marvelously  organized  power  of  German  autocracy, 
we  may  well  take  a  leaf  out  of  its  book. 

One  of  the  main  reasons  for  Germany's  remarkable 
development  in  the  thirty  or  forty  years  period  preced- 
ing the  war,  is  the  way  she  has  dealt  with  the  complex 
and  difficult  problems  of  economic,  commercial  and  fis- 
cal policy.  She  recognized,  long  since,  that  such  prob- 
lems cannot  be  successfully  handled  haphazardly  or  in 
town-meeting  fashion,  or  emotionally;  still  less  can 
they  be  made  the  football  of  politics.  The  German  way 
has  been  to  turn  such  matters  over  for  study  and  report 
to  those  best  qualified  by  experience  and  training,  and 
thus  having  obtained  expert  advice,  to  respect  it  and  in 
its  large  outlines  to  follow  it. 

Upon  the  basis  of  the  views  of  these  experts,  in  com- 
bination with  their  own  studies,  the  responsible  officers 
of  the  Government  prepare  a  thoroughly  matured  and 
comprehensive  plan.  The  representatives  of  the  people 
criticize,  modify,  add  here,  take  off  there,  but  nearly 
always  they  preserve  the  broad  outlines  which  the  con- 
sensus of  expert  opinion  has  indicated  as  appropriate 
and  advantageous. 

Similarly,  Great  Britain,  for  many  years,  by  the 
appointment   of   "Royal   Commissions,"  so-called,  has 


NEED    FOR    NATIONAL    EFFICIENCY       223 

employed  with  success  a  method  of  obtaining  "light 
without  heat"  in  respect  of  problems  as  to  which  the 
Government  and  the  people  desired  disinterested  and 
competent  information  and  suggestions.  Such  Commis- 
sions are  composed  usually  of  a  certain  proportion  of 
legislators  to  whom  are  added  a  greater  or  lesser  number 
of  persons  particularly  qualified  to  advise  on  the  sub- 
ject under  review.  The  bodies  thus  constituted  inves- 
tigate, hold  hearings,  ascertain  facts,  collate  views  and 
submit  their  findings  and,  if  desired,  their  recommen- 
dations in  public  reports.  In  the  great  majority  of 
cases,  such  Commissions,  though  composed  of  very  di- 
versified elements,  have  arrived  at  a  consensus  of  opin- 
ion in  the  main. 

It  would  seem  that  it  would  serve  the  public  to  ad- 
vantage if  a  similar  method  of  procedure  were  to  be 
made  customary  in  this  country.  I  have  in  mind  not 
only  the  many  immediate  questions  of  a  non-military 
character  which  are  incident  to  the  war,  but  still  more 
the  many  grave  and  novel  problems  of  an  economic, 
social  and  financial  character  which  will  confront  us 
with  the  advent  of  peace. 

The  President,  the  heads  of  the  Executive  Depart- 
ments, and  Congress  are  vastly  overworked.  It  is  sim- 
ply inconceivable  that  these  instrumentalities  of  ad- 
ministration and  legislation  can  give  the  necessary  time 
and  thoroughness  of  study  to  the  variety  of  complex 
questions  which  call  and  will  increasingly  call  for 
consideration  and  action.  The  burden  which  both  the 
Senate  and  the  House  place  upon  their  members  in  the 
investigating  and  gathering  of  facts  and  the  hearing  of 


224  BUSINESS      AND      ECONOMICS 

witnesses,  is  exceedingly  heavy.  A  very  large  portion 
of  the  time  and  energies  of  our  legislators  are  absorbed 
in  these  functions.  Much  relief  and  good  results  could 
be  obtained  by  placing  part  of  that  burden  upon  the 
shoulders  of  others.  The  best  ability  and  ripest  experi- 
ence of  the  country  could  be  called  upon  and  would 
surely  be  found  ready  to  serve.  The  decision  and  re- 
sponsibility as  to  legislation  would,  of  course,  rest  no 
less  than  now  with  the  Congress  and  the  President. 

It  is  of  the  essence  of  my  suggestion  that  such  Com- 
missions should  be  appointed  and  selected  not  by  the 
Executive  but  by  Congress  acting  through  the  Presi- 
dent of  the  Senate  and  the  Speaker  of  the  House. 
Experience  has  shown  that  the  findings  of  outside  Com- 
missions appointed  by  the  Executive,  whether  Federal 
or  State,  have  rarely  been  of  great  influence  with  the 
legislatures.  I  should  be  hopeful  that  Commissions 
designated  and  directed  by  Congress  and  containing  a 
proportion  of  Senators  and  Congressmen,  would  prove 
more  effective. 

IV 

It  is  an  interesting  and  significant  fact  that  in  Great 
Britain,  apart  from  those  conducting  the  military  and 
naval  operations,  fully  75%  -of  the  men  at  the  head  of 
the  various  departments  which  together  constitute  that 
country's  huge  war  machine,  are  business  men.  They 
are  clothed  with  ample  executive  authority  in  their  re- 
spective functions.  A  large  proportion  of  the  mem- 
bers of  the  British  Cabinet  are  men  of  affairs;  so  are 


NEED    FOR    NATIONAL    EFFICIENCY       225 

a  very  considerable  proportion  of  the  members  of  Par- 
liament. 

Our  Cabinet  contains  one  business  man ;  very  few  of 
them  can  be  found  among  the  men  composing  our  vari- 
ous governmental  Boards  and  Commissions  of  a  per- 
manent character,  such  as  the  Federal  Trade  Commis- 
sion, the  Interstate  Commerce  Commission,  etc.  (ex- 
cepting the  Federal  Reserve  Board)  ;  the  proportion  of 
business  men  in  Congress  is  quite  small. 

At  present,  it  is  true,  in  the  face  of  a  compelling 
emergency  the  Administration  has  called  a  number  of 
business  men  into  the  service  of  the  Government.  But 
has  it  gone  far  enough  and  have  sufficient  scope  and 
power  been  given  to  such  men?  Have  they  been  set 
sufficiently  to  the  task  of  organizing  and  executing  in- 
stead of  merely  advising  and  recommending?  In  the 
huge  business  undertaking  of  a  nation  at  war  have  we 
sufficiently  aimed  to  follow,  as  far  as  may  be,  the  tried 
and  tested  system  of  our  best  business  organizations? 

And,  with  all  due  respect  for  the  representatives  of 
the  people,  and  giving  them  full  credit  for  hard  work 
and  patriotic  effort  and  individual  ability,  can  it  truth- 
fully be  said  that  the  Congress  has  adjusted  itself  to 
the  unique  demands  of  the  time?  It  has  made  no 
change  whatever  in  its  inherited  methods,  system  and 
procedure.  It  appears  strangely  prejudiced  against 
expert  opinion  and  is  apt  to  deal  in  rough  and  ready 
fashion  with  delicate  and  difficult  problems  such  as 
those  of  economics,  profoundly  affecting  as  they  do 
the  nation's  well-being. 

A  striking  instance  of  this  tendency  is  presented  in 


226  BUSINESS     AND      ECONOMICS 

the  proceedings  the  outcome  of  which  was  the  tax  bill 
adopted  in  October,  1917. 

First,  the  House  Committee  in  charge,  after  some 
four  weeks'  study  and  discussion,  draws  up  a  bill  and 
reports  it  to  the  House.  The  House  promptly  proceeds 
to  tear  it  to  pieces.  Amendment  after  amendment  is 
offered  and  accepted  on  the  floor.  The  measure,  in  its 
nature  intricate,  with  one  part  depending  on  the  other, 
is  revamped  in  a  running  debate  and  thus,  knocked  out 
of  shape,  is  adopted. 

Then  the  Senate  Committee  takes  hold  giving  nearly 
three  months  to  the  study  and  preparation  of  the  meas- 
ure, hearing  experts,  saturating  itself  with  the  subject 
and  evolving  a  bill  which,  if  not  wholly  free  from  ob- 
jection, is  carefully  drawn  and  well-balanced.  Re- 
ported to  the  Senate,  it  is  altered  upon  the  motion  of 
any  member  who  can  get  a  sufficient  following  to  en- 
graft his  notions  upon  the  measure,  is  fundamentally 
and  radically  modified  and  thrown  out  of  gear,  and  thus 
adopted. 

Both  houses  of  Congress  have  rejected  the  pains- 
taking work  of  their  own  Committees  whose  special 
function  it  is  to  frame  financial  measures,  and  who 
had  given  weeks  and  months  to  the  study  of  the  prob- 
lems involved. 

The  two  bills  thus  evolved  largely,  so  to  speak,  on 
the  spur  of  the  moment,  are  taken  into  conference. 
The  weary  and  discouraged  members  of  the  Conference 
Committee  confer.  There  is  need  for  hurry  because 
Congress  is  clamoring  to  get  through  and  adjourn. 

In  a  short  time,  after  debate  carried  on  behind  closed 


NEED    FOR    NATIONAL    EFFICIENCY      227 

doors,  another  bill  emerges,  different  in  many  respects 
from  any  that  has  gone  before,  bearing  evidence  of  in- 
sufficient thought,  of  makeshift  compromises  and,  in 
certain  respects,  of  prejudice  and  pectional  prefer- 
ences. 

With  very  little  discussion  and  practically  no  effec- 
tive scrutiny  a  hurried  Congress  adopts  that  bill.  Many 
of  its  details  are  so  intricate,  many  of  its  definitions  so 
obscure,  many  of  its  provisions  so  unworkable,  that  to 
this  day  they  have  not  been  fully  unravelled.  It  bris- 
tles with  inconsistencies.  It  embodies  no  recognizable 
theory  of  taxation. 

The  business  community  had  kept  its  calm  and  cour- 
age in  the  face  of  war.  It  would  have  confronted  with- 
out more  than  a  passing  tremor  the  huge  taxation  which 
it  was  called  upon  to  bear.  But  seeing  itself  faced  not 
only  with  huge  but  with  ill-contrived,  oppressive,  and 
invidious  taxation,  seeing  the  obscurities  and  complexi- 
ties of  the  law  and  the  bungling,  prejudiced,  and  un- 
scientific handling  of  a  matter  of  signal  moment  to  the 
country's  well-being,  seeing  the  spirit  behind  the  bill 
and  visualizing  its  potentialities,  business  is  seized 
with  alarm. 

The  disturbance  spreads,  confidence  is  shaken,  the 
investor  throws  his  securities  overboard,  corporations 
and  individual  business  men  suddenly  are  halted  in 
their  plans.  Acute  depression  has  set  in.  The  loss  in 
quoted  security  values  alone  amounts  to  billions  of 
dollars. 

Yet,  all  this  could  so  easily  have  been  avoided.  It 
was  not  really  a  problem  of  much  difficulty  to  devise  a 


228  BUSINESS     AND      ECONOMICS 

bill  which  would  have  raised  equally  as  much  revenue, 
would  have  been  no  less  in  accord  with  the  dictates  of 
social  justice,  and  yet  would  weigh  far  more  lightly 
on  the  country. 

I  do  not  mean  before  this  non-partisan  assembly  to 
criticize  individual  Congressmen  or  Senators.  I  do 
criticize  the  system  which  has  not  been  brought  up  to 
date  and  which  is  no  longer  adequate  to  the  needs  of 
the  day. 

Thus,  for  instance,  the  Chairmen  of  Committees  hold 
their  offices  by  seniority  instead  of  being  selected  for 
fitness.  There  is  no  authoritative  Steering  Committee 
to  determine  the  priority  of  legislative  measures.  There 
are  no  effective  rules  to  control  the  flood  of  private 
members  bills.  There  is  no  bill-drafting  bureau  at- 
tached to  our  national  legislature,  such  as  exists  in  every 
other  advanced  country  and  in  many  of  our  states. 
Ours  is  the  only  great  country  in  which  no  budget  sys- 
tem prevails.  Income  and  outgo  are  handled  by  I  don't 
know  how  many  separate  and  unrelated  committees. 
By  cumbersome  statutes  and  minute  and  inelastic  rules 
and  regulations  Congress  has  spun  a  web  of  red  tape 
around  administrative  and  executive  procedure,  and  has 
turned  a  deaf  ear  to  the  call  for  the  modernization  of 
Government  business  methods. 


There  is  no  reason  why  with  wise  and  sure  guidance 
in  economic  affairs,  the  inevitable  effect  of  war  on 
business   should   lead    to   the   semi-panicky   condition 


NEED    FOR    NATIONAL    EFFICIENCY       229 

which  prevailed  in  our  financial  markets  last  Novem- 
ber and  December.  After  three  and  a  half  years  of 
war,  the  Berlin  market  is  steady  and  there  is  actually 
a  fair  investment  demand.  Trade  in  England,  on  the 
whole,  is  prosperous.  In  France,  at  this  moment,  pri- 
vate investors — not  the  State — are  finding  money  for 
new  iron  and  steel  works  and  shipbuilding  plants. 

Our  foundations  are  stronger  than  those  of  any 
other  country,  but  it  remains  no  less  necessary  that  the 
right  plans,  methods  and  means  be  used  in  rearing  the 
superstructure.  Natural  wealth,  advantageous  loca- 
tion and  favorable  opportunities  are  not  sufficient  to 
raise  a  country  to  eminence  and  its  people  to  well- 
being. 

China,  for  instance,  has  intrinsic  resources  second 
to  few  other  countries  in  the  world.  It  is  incomparably 
better  endowed  by  nature  than  the  poor,  unfertile 
islands  of  Japan.  Yet  China,  with  her  immense  nat- 
ural wealth,  is  weak  and  poor  because  individual  enter- 
prise and  the  impulse  of  governmental  efficiency  are 
lacking.  But  Japan,  by  wise  governmental  planning, 
by  encouraging  individual  effort  and  fostering  the  ac- 
tivities of  business,  has  grown  rich  and  powerful,  and 
in  conjunction  with  China,  is  offering  a  field  to  capital 
and  to  men  of  enterprise  the  potentialities  of  which 
we  shall  do  well  not  to  underestimate. 

This  question  of  governmental  efficiency  and  wisdom 
in  the  realm  of  economics  is  fundamental.  It  ramifies 
through  every  phase  of  the  country's  life.  More  espe- 
cially in  war  time  is  it  essential  that  the  nation  proceed 
along  the  lines  of  wise  and  consistent  and  purposeful 


230  BUSINESS     AND     ECONOMICS 

planning,  and  that  business  feel  reasonably  assured  on 
that  score. 

For,  it  is  vital  during  war  as  well  as  during  the 
reconstruction  period  to  follow  that  production  be  in- 
tensified to  the  utmost,  and  this  cannot  be  done  unless 
the  spirit  of  enterprise,  individual  activity  and  buoyant 
faith  in  the  future  be  maintained  in  the  face  of  diffi- 
culties and  trials,  and  notwithstanding  heavy  and  un- 
usual financial  burdens. 

We  do  not  complain  at  any  burden  within  our 
capacity  to  bear,  which  the  necessities  of  the  country 
require  us  to  assume,  or  which  real  public  opinion,  as 
distinguished  from  the  noisy  advocates  of  extremism, 
desires  to  impose  upon  us.  But,  of  course,  there  is  a 
point  beyond  which  the  laying  on  of  burdens  cannot  go 
without  killing  enterprise  and  gravely  upsetting  busi- 
ness, with  consequences  seriously  detrimental  to  the 
commonwealth  and  withering  in  their  effect  upon  the 
capacity  of  capital  to  provide  funds  for  the  conduct 
of  the  war. 

What  we  business  men  protest  against  is  ignorance, 
shallow  thought  or  doctrinairism  assuming  the  place 
belonging  to  expert  opinion  and  tested  practical 
ability. 

We  protest  against  demagogism,  envy  and  prejudice, 
camouflaging  under  the  flag  of  war  necessity  and  social 
justice  in  order  to  wage  a  campaign  through  inflam- 
matory appeal,  misstatement  and  specious  reasoning  to 
punish  success,  despoil  capital  and  harass  business. 

We  impugn  the  presumption  that  men  who,  mostly 
from  small  beginnings,  have  fought  their  way  to  the 


NEED    FOR    NATIONAL    EFFICIENCY       23 1 

top  after  having  passed  through  the  hard  and  searching 
test  and  discipline  of  business,  are  to  be  ignored  or  dis- 
trusted in  the  shaping  of  the  industrial  and  economic 
policies  of  the  country,  because  of  alleged  incapacity 
or  unwillingness  to  take  a  broad,  enlightened  and  pa- 
triotic view  of  national  questions  directly  or  indirectly 
affecting  their  own  interests. 

We  deny  the  suggestion  that  patriotism,  virtue,  and 
knowledge  reside  primarily  with  those  who  have  been 
unsuccessful,  those  who  have  no  practical  experience  of 
business,  or,  be  it  said  with  all  respect,  with  those  who 
are  politicians  or  office  holders. 

I  believe  it  cannot  be  gainsaid  that  there  is  no  great 
country  where  the  capacities  of  representatives  of  busi- 
ness are  so  little  availed  of  in  governmental  and  politi- 
cal affairs,  their  views  so  little  heeded  and  so  frequently 
rebuffed,  where  legislation  affecting  economic,  indus- 
trial and  financial  matters  is  framed,  and  the  resulting 
laws  administered  with  so  little  regard  for  the  counsel 
and  expert  knowledge  of  business  men  as  in  the  United 
States.  A  number  of  instances  could  be  cited  of  law- 
making where,  if  the  advice  of  such  men  had  been 
taken,  the  aims  sought  to  be  accomplished  could  have 
been  attained  with  equal  or  greater  sureness  of  effect 
and  without  undesirable  incidental  results  such  as  were 
not  intended  by  the  legislators,  though  clearly  foreseen 
by  the  trained  experience  of  business  men. 

Undue  subserviency  to  the  despoilers  and  defamers 
of  capital  and  business  is  no  less  wrong  than  undue 
consideration  for  capital  and  business.  A  democracy 
which  discriminates  against  a  class  or  a  section  is  just 


232  BUSINESS      AND     ECONOMICS 

as  guilty  as  an  autocracy  which  discriminates  in  favor 
of  a  ruling  caste.  Self-government  presupposes  self- 
restraint. 

We  business  men  are  made  of  no  different  stuff  from 
other  Americans.  We  are  no  class  apart  from  the  rest 
of  the  community.  We  are  eager  to  have,  and  we  mean 
to  deserve,  the  good-will  and  respect  of  our  fellow- 
citizens. 

Of  the  great  democracy  of  business,  we  are  the  con- 
stituents. We  are  its  component  parts,  its  army,  its 
defenders.  If  we  understand  aright  our  mission  and 
our  functions,  we  have  no  interest  different  from  the 
interests  of  the  country  at  large.  We  cannot  prosper 
unless  the  country  prospers,  we  suffer  when  the  country 
suffers. 

The  time  when,  in  the  general  rush  and  turmoil  of  a 
period  of  tremendous  and  headlong  development,  big 
business  was  to  some  extent  a  law  unto  itself,  is  over, 
never  to  return. 

We  must  accept  and  we  should  welcome  reasonable 
supervision  and  regulation.  We  must  obey  in  good 
faith  and  in  a  loyal  spirit  of  good  citizenship  the  de- 
crees of  matured  public  opinion.  We  must  in  all 
aspects  deal  fairly  with  the  public.  We  must  give  to 
labor,  willingly  and  freely,  what  properly  belongs  to 
labor.     We  must  give  to  Csesar  what  is  Caesar's. 

We  must  and  we  should  cheerfully  recognize  the 
democratic  spirit  and  tendencies  of  the  day.  We  must 
cordially  co-operate  toward  all  rational  measures  cal- 
culated to  augment  the  opportunities,  the  happiness, 
contentment  and  well-being  of  the  people.     We  must 


NEED    FOR    NATIONAL    EFFICIENCY       233 

help  to  correct  such  shortcomings  of  the  present  social 
order  as  justly  call  for  reform. 

We  should  be  the  first  to  discountenance  "profiteer- 
ing" in  war  times  (indeed,  we  should  discountenance 
the  exacting  of  extortionate  profits  from  the  public  at 
any  time),  as  well  as  unfair  treatment  of  employees  and 
other  objectionable  practices,  and  to  denounce  those  in- 
dulging in  them  as  enemies  of  business,  as  they  are 
enemies  to  that  national  good  feeling  and  that  fair 
and  reasonable  adjustment  of  social  relationship  which 
must  be  striven  for,  sincerely  and  persistently,  if  class 
misunderstandings,  class  animosities  and  the  resulting 
evil  consequences  are  to  be  avoided. 

But  we  are  not  called  upon  and  we  are  not  willing 
to  resign  our  functions.  We  will  not  tamely  submit  to 
professional  agitators  and  trouble  makers,  nor  will  we 
acknowledge  the  superior  wisdom  in  practical  affairs 
of  theorists  and  doctrinaires.  We  will  defend  our 
just  rights  against  either  paternalism  or  extremism. 

We  shall  have  to  meet,  after  the  return  of  peace, 
both  in  our  own  country  and  abroad,  the  onset  of  the 
business  men  of  Europe,  spurred  on  by  dire  necessity 
to  put  forth  their  utmost  efforts,  trained  to  discipline, 
co-operation  and  inventiveness  in  the  cruel  school  of 
years  of  desperate  war  upon  their  own  soil  or  at  their 
very  door,  backed  by  the  full  power  of  their  respective 
governments  and  the  laws  of  their  countries. 

I  have  no  fear  but  that  American  business  men  will 
hold  their  own  in  that  fierce  competition;  provided — 
not  that  they  be  given  the  thorough  and  active  govern- 
mental backing  which  other  nations  extend  to  their 


234  BUSINESS     AND      ECONOMICS 

merchants,  manufacturers  and  bankers  (we  do  not  ask 
for  that  and  we  believe  we  do  not  require  it) — but 
provided  that  they  be  not  hampered  and  harassed  by 
the  Government;  provided  that  ignorance,  prejudice, 
ill-will  and  suspicion  be  not  permitted  to  place  fetters 
upon  them. 

Business  asks  a  fair  field  and  no  favor.  It  must 
expect  no  more.  If  it  makes  it  plain  to  public  opinion 
that  it  seeks  no  more  and  that  it  is  conscious  of  its 
duties  and  obligations  as  well  as  of  its  opportunities, 
it  will — I  am  confident — receive  no  less  at  the  hands 
of  the  people. 


THE  MENACE  OF  PATERNALISM 


N, 


I 


O  apology  is  needed,  I  believe,  if,  in  this  meet- 
ing of  business  men,  I  begin  my  remarks  with  a  trib- 
ute to  the  American  Army.  I  hope  I  am  not  usually 
given  to  "tall  talk,"  but  I  admit  that  since  I  came 
back  from  Europe  two  months  ago,  I  have  been  boast- 
ful, vociferously  and  unblushingly  boastful,  about  our 
boys  "over  there"  and  their  leaders. 

It  was  my  privilege  to  see  a  good  deal  of  the  Amer- 
ican soldiers  within  the  last  six  months.  I  saw  them, 
in  their  cramped  and  crowded  quarters,  on  the  boats 
which  carried  them  across  the  submarine-infested  ocean, 
many  of  them  away  from  home  for  the  first  time  in 
their  lives.  I  saw  them  in  Paris  unconcernedly  playing 
ball  in  the  streets  while  bombs  from  long-range  guns 
were  exploding  in  the  immediate  neighborhood.  I  saw 
them  at  French  ports,  and  at  villages  throughout  the 
fair  land  of  France,  cheerily  taking  things  as  they  came, 
the  rough  with  the  smooth — and  there  was  a  good  deal 
more  rough  than  smooth. 

I  met  them  as  foresters  in  the  extreme  south  of 
France,  near  the  Spanish  frontier.  I  met  them  as  en- 
gineers and  in  numberless  other  capacities  and,  finally, 

An  address  before  the  Convention  of  The  American  Bankers  Asso- 
ciation, Chicago,  September  27,  1918. 

235 


236  BUSINESS     AND     ECONOMICS 

I  saw  them  as  fighting  men  at  the  front.  I  met  many 
of  their  leaders,  from  their  great  chief,  General  Persh- 
ing, down. 

I  saw  the  marvelous  work  at  the  French  ports,  in  our 
huge  camps  and  bases,  and  along  our  lines  of  com- 
munication, which  these  men  had  accomplished  and 
were  accomplishing  with  a  bigness  of  vision,  a  boldness 
of  planning,  a  directness  of  attack,  a  perfection  of  exe- 
cution and  a  courageous  assumption  of  responsibility, 
that  would  have  done  credit  to  renowned  captains  of 
industry. 

Everywhere  I  found,  among  officers  as  well  as  among 
men,  the  same  simple  and  unostentatious,  yet  steel- 
clad  determination  to  do  and  dare  and,  if  so  fated,  to 
die,  for  the  honor  and  protection  of  America.  Every- 
where the  same  eager  and  tireless  exertion  and  keen, 
quick-witted  adaptability.  Everywhere  the  same  mod- 
est and  soldierly  bearing,  the  same  uncomplaining  en- 
durance under  hardships  and  discomforts,  the  same 
contempt  for  danger.  Everywhere  the  same  note  of 
splendid  courage,  moral  and  physical,  of  willing  dis- 
cipline and  service,  of  buoyant  good  nature  and  humor, 
of  clean  and  kindly  thought  and  feeling. 

That  young  army  of  ours  has  now  been  tested  in 
many  a  battle,  and  wherever  it  has  fought,  it  has 
proved  itself  imbued  with  the  spirit  of  heroic  valor,  a 
worthy  custodian  of  American  honor,  a  zealous  artisan 
of  American  glory. 

When  victory  and  peace  will  have  come  to  our 
cause,  those  competent  and  qualified  to  do  so  will  tell 
the  full  story  of  the  American  Forces  in  France.     It 


MENACE      OF      PATERNALISM  237 

will  be  a  story  big  with  pride  and  inspiration  to  every 
American. 

II 

Now,  gentlemen,  what  is  the  underlying  cause  for 
the  phenomenon  that  our  boys,  taken  from  the  most 
diversified  walks  of  life,  brought  up  in  surroundings 
and  in  a  spirit  which  are  the  very  negation  of  martial 
disposition,  became  in  an  incredibly  short  space  of  time 
soldiers  of  first  rate  efficiency;  that  our  business  men, 
farmers,  mechanics,  college  boys  are  making  competent, 
indeed,  in  many  cases,  excellent  officers ;  that  among  our 
West  Pointers,  taken  from  small  army  posts  or  office 
positions  in  Washington,  were  discovered  men  fitted, 
when  the  emergency  arose,  to  plan  and  execute  the  busi- 
ness undertakings  of  war  on  a  stupendous  scale  with  a 
high  degree  of  organizing  and  administrative  ability 
(even  though  these  men  would  be  the  last  to  dispute 
that  a  considerable  share  of  the  credit  for  the  results 
accomplished  is  due  to  those  who,  at  the  very  start  of 
the  war,  eagerly  volunteered  from  civil  life)  *?  Why 
did  our  commanding  officers,  our  engineers  and  others 
at  various  French  ports,  at  our  army  bases,  along  our 
great  line  of  supplies,  in  a  strange  country,  under  con- 
ditions entirely  new  to  them,  demonstrate  the  capacity 
of  rapidly  sizing  up  situations,  of  boldly  meeting  and 
overcoming  difficulties,  of  vigorously  cutting  the  red 
tape  of  generations,  of  accomplishing  things  which 
bureaucratic  routine  of  ever  so  many  years  had  failed  or 
found  itself  impotent  to  deal  with'? 

I  have  heard  these  questions  asked  and  debated  many 


238  BUSINESS     AND      ECONOMICS 

times  in  England  and  France,  and  the  consensus  of 
replies  was  this: 

"You  in  America  have  always  been  a  nation  of 
private  enterprise  and  individual  initiative. 

"Your  incentive  has  never  been  to  get  a  govern- 
mental title  or  a  bureaucratic  position.  Your  incen- 
tive was  zest  and  scope  for  doing  things,  the  joy  of 
creative  effort,  the  urge  of  a  certain  crude,  rough-hewn, 
unsystematic,  but  effective  practical  idealism  or  ideal- 
ized realism,  whichever  you  want  to  call  it,  and  also, 
of  course,  the  large  material  rewards  of  successful 
achievement.  You  have  had  no  caste,  or  fixed  class, 
either  aristocratic  or  bureaucratic.  You  have  given 
almost  unlimited,  perhaps  too  unlimited  scope  to  am- 
bition,  ability,   force,   imagination,  hard  work. 

"Your  employee  of  today  was  and  is  the  employer 
of  tomorrow. 

"The  State,  far  from  enjoying  the  halo  descended 
from  kingly  times  of  something  resembling  omnip- 
otence and  omniscience,  and  being  all-pervasive  in  its 
functions,  was  largely  limited  in  its  activities,  and  you 
had  a  healthy  skepticism  of  governmental  capacity  to 
do  things  well. 

"Under  the  stimulus  of  these  conditions  you  have 
produced  a  race — daring,  keen,  quick-witted,  adaptable, 
self-reliant. 

"The  American  of  today,  as  we  see  him  in  the  of- 
ficers and  men  of  your  forces,  and  in  the  business  men 
we  have  met,  is  the  product  of  sturdy  individualism." 

And  then  the  Englishman  would  be  apt  to  explain 
that  the  rank  and  file  of  Britishers  are  also  in  their 
heart  of  hearts  individualists  and  normally  opposed  to 
the  undue  multiplication  of  governmental  functions. 


MENACE      OF      PATERNALISM  239 

He  would  not  dispute  that  the  war  was  bound  to  bring 
about  great  social  and  economic  changes  together  with 
a  tendency  toward  far-going  radicalism  and  toward  a 
general  leveling,  but  would  maintain  that  the  ambi- 
tious programs  and  sweeping  pronouncements  of  those, 
largely  writers,  economists  and  theorists  who  ran  the 
political  end,  and  only  the  political  end,  of  the  British 
labor  party  did  not  represent  the  level-headed  majority 
of  the  rank  and  file,  and  were  apparently  taken  more 
seriously  abroad  than  at  home. 

The  Frenchman,  being  like  most  of  his  countrymen, 
something  of  a  practical  philosopher  and  an  admirable 
talker,  would  be  apt  to  go  rather  further  afield. 

He  would  point  out  that  France  has  had  experience 
of  bureaucracy,  governmental  centralization  and  pater- 
nalism for  several  generations.  The  nation  had  tested 
that  system  under  an  autocratic  regime,  under  a  liberal 
monarchy,  under  a  bourgeois  republic  and  under  a  rad- 
ical, and  at  times  semi-socialist,  republic. 

And  the  conclusion  was  now  widespread  among 
Frenchmen  that  it  was  not  what  it  was  "cracked  up" 
to  be,  except  under  a  great  organizing  and  vitalizing 
genius  like  the  first  Napoleon  and  that  they  did  not 
like  that  system.  It  had  lamed  enterprise,  atrophied 
commercial  daring,  retarded  the  development  of  the 
country,  and  driven  a  large  portion  of  the  national 
wealth  into  more  or  less  hazardous  undertakings  abroad, 
lacking  constructive  opportunity  for  it  at  home. 

It  was  largely  responsible  for  the  fact  that  France, 
naturally  the  richest  and  most  abundantly  endowed 
country  of  Europe,  had  permitted  itself  to  be  out- 


24O  BUSINESS     AND     ECONOMICS 

distanced  economically  and  industrially  by  other  coun- 
tries less  favorably  situated  as  far  as  natural  resources 
were  concerned,  notably  Germany.  It  had  allowed  a 
state  of  affairs  to  develop  where  but  for  the  magnificent 
manifestation  of  the  superb  innate  qualities  of  the 
French  race,  which  no  governmental  system  could  per- 
manently vitiate,  Germany  might  have  come  measur- 
ably near  succeeding  in  its  infernal  plan  to  cripple 
France  lastingly. 

In  Russia,  bureaucracy  and  paternalism,  plus  weak, 
corrupt  and  inefficient  autocracy,  had  led  to  revolution, 
chaos  and  anarchy. 

In  Germany,  bureaucracy  and  paternalism  plus  mili- 
tarism and  junkerism,  had  resulted  in  bringing  untold 
misery  upon  the  world  at  large  and  inevitable  disaster 
in  the  end  to  the  German  people.  And  that  notwith- 
standing the  fact  that  not  only  was  the  German  system 
of  bureaucracy  and  paternalism  the  most  efficient  the 
world  had  ever  seen,  but  that  with  deep  and  insidious 
cunning  it  camouflaged  its  true  meaning  and  purpose 
in  that  it  made  an  alliance  with  big  business  by  which, 
in  return  for  being  left  alone  and,  if  need  be,  sup- 
ported in  its  political  dominion  and  in  its  particular  in- 
terests, it  maintained  a  reciprocal  attitude  toward  the 
great  combinations  in  finance  and  industry.  It  fur- 
thered enterprise  and  gave  liberal  scope  and  rich  re- 
ward to  achievement.  Its  method  of  dealing  with  la- 
bor was  in  part  to  coerce  it  and  deprive  it,  by  direct  or 
indirect  means,  of  adequate  voting  and  political  power 
and  in  part  to  cajole  and  conciliate  it  by  apparently  pro- 
gressive and  fair-seeming  social  welfare  legislation.    In 


MENACE     OF     PATERNALISM  24I 

other  words  it  aimed  at  making  contented  and  pros- 
perous chainbearers  out  of  the  German  people,  and  at 
the  same  time — and  alas !  all  too  successfully — at  sub- 
stituting for  their  old  conceptions  and  ideals  a  religion 
of  greed,  covetousness,  power-worship  and  materialism, 
the  deity  of  which  was  the  State  as  represented  by  its 
ruling  caste. 

In  short,  my  French  interlocutors  would  agree  that 
whenever,  wherever  and  however  the  system  of  govern- 
mental omnipotence  had  been  tried,  it  had  failed  in  a 
greater  or  lesser  degree;  that  France  had  given  it  a 
sufficiently  long  test  to  be  weary  of  it,  and  that  after 
the  war  the  tendency  of  the  French  people  would  be 
rather  to  turn  toward  individual  effort  and  to  stimu- 
late personal  initiative — fully  conscious  at  the  same 
time  that  no  social  order  or  system  was  thinkable  after 
the  war  which  did  not  take  complete  account,  sincerely 
and  wholeheartedly,  of  the  aspirations  and  just  de- 
mands of  the  rank  and  file. 

I  should  add,  in  order  to  give  an  entirely  truthful 
picture,  that  the  Englishmen  whom  I  heard  discuss  this 
subject,  were  mainly  business  men  and  others  whose 
views  may  have  been  somewhat  colored  because  their 
surroundings  and  interests  would  naturally  tend  to 
make  them  averse  to  a  radical  change  in  the  existing 
order  of  things. 

But  the  French  feeling  as  I  have  tried  to  set  it  forth, 
I  heard  expressed  by  all  kinds  and  conditions  of  men 
— from  workingmen  and  small  trades-people  to  finan- 
ciers, military  officers  and  statesmen.  And  it  should 
be  borne  in  mind  that  the  French  are  endowed  with 


242  BUSINESS     AND      ECONOMICS 

the  faculty  of  a  proverbially  clear  recognition  of  the 
realities  of  things  and  more  than  once  in  history  have 
been  the  pathfinders  for  the  social  and  intellectual 
movements  of  the  world. 

On  the  other  hand,  it  cannot  be  gainsaid  that  there 
are  a  good  many  persons  in  France,  as  in  Great  Britain 
and  America,  who  firmly  believe  that  the  era  of  indi- 
vidualism, or  as  they  prefer  to  call  it,  capitalism,  has 
come  to  an  end,  and  that  an  entirely  new  kind  of  social 
structure  will  be  reared  after  the  war. 


Ill 

They  are  very  active,  zealous  and  eager,  these  mili- 
tant preachers  of  a  new  day.  They  possess  the  fervor 
of  the  prophet  allied  often  to  the  plausibility  and  cun- 
ning of  the  demagogue.  They  have  the  enviable  and 
persuasive  cocksureness  which  goes  with  lack  of  re- 
sponsibility and  of  practical  experience.  They  pour 
the  vials  of  scorn  and  contempt  upon  those  benighted 
ones  who  still  tie  their  boat  to  the  old  moorings  of  the 
teachings  of  history  and  of  common  sense  appraisal  of 
human  nature.  And  being  vociferous  and  plausible 
they  are  unquestionably  making  converts. 

They  are  offering  the  vista  of  a  catching  program 
to  the  popularity-seeking  politician.  They  are  per- 
turbing the  minds  of  many  who  honestly  seek — as  every 
right  minded  man  should — to  bring  about  a  better 
and  more  justly  ordained  world.  They  have  not  been 
without  producing  a  certain  effect  even  in  high  places. 

Nothing  is  easier  to  start,  nothing  moves  faster  when 


MENACE      OF      PATERNALISM  243 

once  started,  than  economic  fallacies,  especially  when 
to  their  natural  speed  is  added  the  impulse  of  a  glitter- 
ing and  facile  idealism  which  holds  out  to  the  world 
surcease  from  many  of  those  troubles  with  which  man- 
kind has  grappled  since  its  progenitors  left  the  Garden 
of  Eden. 

Nothing  is  harder  than  for  sober  unvarnished  truth, 
loaded  down  with  the  weight  of  the  realities  of  exist- 
ence, to  catch  up  with  those  fallacies.  It  invariably 
does  in  the  end,  but  meanwhile  the  fallacies  on  their 
long  start  and  rapid  flight  may  have  wrought  vast 
harm,  as  we  see  exemplified  in  Russia. 

We  hear  a  good  deal  nowadays  of  "the  war  after 
the  war" — meaning  thereby  the  expected  economic  dis- 
cord and  strife  in  the  markets  of  the  world  between 
Germany  and  her  vassals  on  the  one  hand  and  the 
Powers  now  arrayed  against  them  on  the  other.  That 
discussion,  to  an  extent,  it  seems  to  me,  is  premature. 

Germany  and  those  who  aided  and  abetted  her,  must 
and  will  be  defeated,  decisively  and  completely  de- 
feated. The  handwriting  on  the  wall  which  pro- 
claims the  doom  and  destruction  of  Prussianism  stands 
out  more  fatefully  and  legibly  every  day.  But  the 
treatment  to  be  accorded  to  Germany  in  the  future  will 
depend  in  part,  at  least,  as  President  Wilson  has  indi- 
cated, upon  the  answer  to  the  questions  whether  she 
will  sincerely  and  unmistakably  purge  herself  of  the 
accursed  spirit  which  has  made  her  name  a  by-word 
and  a  hissing  among  decent  nations,  what  attitude  and 
action  she  will  take  toward  those  loaded  down  with 
the  execration  of  the  world  who  primarily  personify 


244  BUSINESS     AND      ECONOMICS 

that  spirit,  and  whether,  contrite,  chastened  and  freed 
from  the  hideous  rule  of  a  barbarous  military  caste,  she 
will  atone,  as  far  as  it  is  in  the  power  of  her  people, 
for  the  unspeakable  crime  of  the  war  unchained  by  her 
and  the  atrocious  brutality  of  its  conduct.  And  a  like 
test  applies  to  those  nations  who  made  themselves  shar- 
ers of  her  guilt.  Let  us  see  how  that  test  is  met  before 
we  envisage  an  economic  "war  after  the  war." 

But  there  is  one  "war  after  the  war"  for  which  the 
lines  are  now  being  drawn,  and  which  indeed  the  at- 
tacking party  has  already  started,  although  it  was  the 
country's  general  understanding  that  until  the  war 
against  our  external  enemy  was  won,  internal  conflicts 
would  be  postponed. 

The  opposing  forces  are,  on  the  one  side,  the  motley 
army  ranging  from  the  American  variety  of  destructive 
Bolsheviks  in  various  gradations  to  self-seeking  dema- 
gogues, well-meaning  utopianists,  iconoclast  theorists, 
intolerant  and  impetuous  young  writers  strong  in  the 
assured  consciousness  of  their  mental  and  moral  su- 
periority, and,  alas!  none  too  rarely,  college  profes- 
sors and  other  teachers  generally  underpaid,  frequently 
overworked,  some  rather  disgruntled  and  acidified,  oth- 
ers carried  away  by  untempered  idealism  and  inclined 
to  take  the  world  as  a  theoretical  proposition  rather 
than  a  stubborn  fact.  Confronting  that  army,  on  the 
other  side,  stand  those  who  believe  that  the  accumu- 
lated wisdom  of  centuries  of  human  experience  is  wis- 
dom still,  and  who  see  in  individualism,  ordered,  en- 
lightened, progressive,  sympathetic  and  adjusted  to  the 
changing  needs  and  social  conceptions  of  the  age,  the 


MENACE      OF      PATERNALISM  245 

soundest  and  most  effective  instrument  for  the  ad- 
vancement and  the  happiness  of  humanity. 

When  I  speak  of  individualism,  I  do  not  mean  the 
harsh  doctrine  of  the  so-called  Manchester  school  of 
the  Nineteenth  Century  which,  with  a  somewhat  naive 
faith  in  the  automatic  and  beneficent  self-regulation  of 
human  forces,  bade  the  individual  to  exploit  his  op- 
portunities to  the  unrestrained  limit  of  his  strength, 
and  "the  devil  take  the  hindmost." 

Nor  do  I  mean  the  picturesque,  semi-romantic  but 
socially  intolerable  individualism  which  in  the  pioneer 
period  of  our  country's  development  brought  forth  a 
body  of  men  whose  daring,  vision,  creative  energy  and 
striving  for  wealth  and  power,  strangely  mixed  at  times 
with  an  element  of  idealism  and  emotionalism,  did 
much  to  produce  the  tremendous  epic  of  America's  un- 
rivalled development,  but  who  after  all  were  more  or 
less  industrial  despots  and  as  such — even  though  benev- 
olent despots,  which  many  of  them  were — rightly  ob- 
noxious to  a  free  people. 

The  individualism  to  which  I  adhere,  spells  neither 
reaction  nor  greed,  selfishness,  class  feeling  nor  callous- 
ness. No  less  than  those  who  carry  their  hearts,  vis- 
ibly aching  for  the  people  and  aflame  against  their 
oppressors,  into  magazine  articles,  political  assemblies 
and  upon  lecture  platforms;  no  less  than  those  who  in 
the  fervor  of  their  world-improving  pursuit  discover 
cure-alls  for  the  ills  of  humanity  which  they  fondly 
believe  new  and  unfailing  remedies  but  which,  as  a 
matter  of  fact,  this  old  globe  of  ours  at  one  time  or 
another  in  one  of  its  parts  or  another,  has  seen  tried 


246  BUSINESS      AND      ECONOMICS 

and  discarded,  after  sad  disillusionment — no  less  than 
they  are  we  desirous  for  the  well-being  and  content- 
ment of  the  masses  of  the  people  and  sympathetic 
toward  and  responsive  to  their  aspirations. 

In  common  with  all  right-minded  and  fair-thinking 
men,  be  they  employers  or  employees,  we  are  ready 
and  glad  to  join  in  every  sincere  effort,  consistent  with 
sane  recognition  of  the  realities  of  things,  to  make  life 
more  worth  living  to  the  rank  and  file  of  humankind. 
So  far  from  obstructing,  we  will  zealously  and  ear- 
nestly co-operate  toward  all  rational  measures,  cal- 
culated to  augment  the  opportunities  and  happiness  of 
the  mass  of  the  people,  to  enhance  their  share  of  ease 
and  comfort  and  of  the  rewards  and  joys  of  life,  and 
to  correct  such  shortcomings  of  the  present  social  order 
as  justly  call  for  reform. 

But  we  will  resolutely  oppose  those  who  in  their  im- 
patient grasping  for  unattainable  perfection  would 
make  of  liberty  a  raging  and  destructive  torrent  instead 
of  a  majestic  and  fertilizing  stream;  who  out  of  the  in- 
gredients of  sentimental  and  emotional  fallacies  mixed 
with  the  deleterious  substances  of  envy  and  demagogy, 
would  concoct  a  fantastic  political  and  social  system; 
who  ignorantly  and  arrogantly  scorn  the  beneficent 
work  and  the  wise  teachings  of  the  great  architects  of 
ordered  freedom. 

IV 

The  individualism  we  believe  in  gives  incentive  to 
every  man  to  put  forth  his  best  effort,  while  at  the  same 
time  it  recognizes  fully  the  right  and  the  duty  of  the 


MENACE      OF      PATERNALISM  247 

State  to  impose  upon  business  reasonable  supervision, 
restraints,  and  regulations,  to  take  measures  destined 
to  raise  the  general  level  of  popular  well-being,  to 
protect  particularly  those  least  able  to  protect  them- 
selves, to  prevent  exploitation  and  oppression  of  the 
weak  by  the  strong  and  to  debar  privilege  and  unfair 
or  socially  harmful  practices. 

And  we  further  believe  that  in  addition  to,  and  over 
and  above  the  limitations  imposed  by  the  State  there 
are  restraints  which  a  man's  conscience  should  impose 
upon  his  actions  in  affairs.  Just  as  we  heed  the  "still 
small  voice"  of  conscience  in  our  personal  conduct,  so 
must  we  harken  to  it  and  be  controlled  by  it  in  our 
relations  to  Society  and  to  the  State.  It  is  not  enough 
to  be  "law-honest"  or  "money-honest,"  and  the  obliga- 
tion to  make  his  actions  square  with  the  dictates  of 
his  "social  conscience"  increases  in  force  and  extent  in 
proportion  as  a  man's  success  and  opportunities  in- 
crease. I  believe  I  am  not  asserting  an  unjustified 
claim  when  I  say  that  the  recognition  of  the  place  due 
to  the  "social  conscience"  is  getting  to  be  more  and 
more  developed  in  the  business  community. 

Few  things  have  brought  more  harm  upon  the  world 
than  attempts,  well  meant  or  otherwise,  to  force  man- 
kind into  ways  of  thought  and  action  to  which  the  na- 
ture of  the  average  man  or  woman  does  not  respond. 
I  am  far  from  under-valuing  the  compelling  impulse 
of  the  call  of  duty,  the  joy  of  service,  the  selfless  zeal 
on  the  high  occasions  of  life,  but  what  we  are  ordi- 
narily dealing  with  are  men's  normal  attitude,  motives 
and  reactions  in  the  affairs  of  the  workaday  world. 


248  BUSINESS     AND      ECONOMICS 

Experience  has  shown  and  common  sense  observa- 
tion confirms  that,  excepting  such  callings  as  men  take 
up  because  of  an  "inner  urge,"  from  a  natural  bent  or 
altruistic  motives,  or  because  they  desire  primarily  po- 
sition, public  office,  or  political  power,  the  vast  major- 
ity of  people  require,  in  order  to  put  forth  the  maxi- 
mum of  effort  and  of  venturing,  an  incentive  largely, 
though  not  solely,  of  a  tangible  kind. 

In  an  emergency,  of  course,  at  the  call  of  the  coun- 
try, every  right-thinking  man  will  not  only  forget  all 
thought  of  reward,  but  will  be  ready  for  every  sacri- 
fice. He  will  work  and  strive  far  harder  than  he  would 
for  his  personal  advantage  and  spend  himself  without 
limit,  from  motives  of  patriotism  or  public  spirit.  But 
under  normal  conditions  other  incentives  are  needed. 
And  it  must  not  be  forgotten  that  legitimate  individ- 
ual achievement,  however  gainful  to  the  person  con- 
cerned, means  in  the  last  analysis  the  creation  of  assets, 
tangible  or  otherwise,  the  resultants  from  which  in  va- 
rious ways  redound  to  much  the  greater  extent  to  the 
benefit  and  advantage  of  the  community  as  a  whole. 

Just  as  punishment  is  meant  as  a  deterrent  and  a  cor- 
rective, so  individual  reward  is  primarily  intended  as  a 
stimulant  and  for  social  utility.  It  is  bestowed  not 
from  tender  solicitude  for  the  recipient,  but  because 
of  the  recognition  that  the  exercise  of  his  faculties  is 
of  advantage  to  the  community.  The  result  aimed  at 
and  effectively  achieved  is  to  stimulate  the  energies  re- 
quired for  the  world's  work  and  progress  and  to  en- 
hance the  scope  of  activity  of  those  who  are  endowed 
above  the  average  with  the  capacities  for  creating  or 


MENACE      OF      PATERNALISM  249 

directing  and  to  make  that  scope  as  near  as  may  be 
proportionate  to  those  capacities. 

The  opposite  way,  that  is  the  communistic  method, 
has  been  tried  over  and  over  again,  in  various  forms, 
and  has  failed  invariably. 

I  am  far  from  saying  that  material  reward  is  the 
only  incentive  to  business  effort.  The  prospect  of  and 
the  ambition  for  attaining  reputation,  standing,  influ- 
ence, the  desire  to  be  of  usefulness  and  service,  the  zest 
of  work  and  strife,  the  joy  of  creative  effort,  the  fas- 
cination of  matching  one's  qualities  of  mind  and  char- 
acter against  those  of  others,  count  for  much,  but 
among  the  conglomerate  of  impulses  which  make  men 
dare  and  plan  and  work  to  their  utmost  capacity,  the 
hope  of  attaining  material  success  is  still  one  of  the 
most  effective.  Nor  is  this  wholly,  or  even  mainly,  a 
materialistic  impulse. 

Individualism  frankly  denies  that  the  world  can  be 
run  on  a  theory  which  presupposes  the  existence  of  men- 
tal, moral  and  physical  equality  between  men.  Equal- 
ity before  the  law,  equality  of  political  rights — yes, 
equality  of  opportunity,  as  far  as  humanly  possible — 
yes.  But,  an  inscrutable  Providence  has  bestowed  upon 
His  creatures,  animate  as  well  as  inanimate,  inequality 
of  natural  endowment,  and  from  that  springs  and  must 
necessarily  spring  inequality  of  results.     ' 

Abstract  justice  is  not  in  the  eternal  scheme  of 
things.  Why  do  some  trees  grow  straight  and  mag- 
nificent, and  others  wither  or  are  stunted?  Why  are 
some  persons  born  with  vigorous  constitutions  or  with 
conspicuous  talents  and  others  not?     Why  is  Caruso 


2^0  BUSINESS     AND      ECONOMICS 

gifted  with  a  voice  which  enables  him  to  make  as  much 
money  in  one  evening  as  the  average  artist  gets  for  a 
year's  work?  Why  do  people  willingly  pay  $10,000 
or  more  to  have  a  portrait  painted  by  Sargent,  when 
Tom  Smith  would  gladly  accept  $100  for  making  their 
picture'?  Why  are  some  endowed  with  the  privilege 
of  understanding  and  appreciating  art  and  deriving  a 
wealth  of  joy,  recreation  and  inspiration  from  it — a 
privilege  which  I  personally  would  not  exchange  for 
any  amount  of  money — and  many  others  not? 

A  lady  said  to  me  the  other  day:  "It  makes  me 
angry  that  Mr.  X  should  live  in  that  splendid  house, 
while  I  have  only  a  simple  flat.  Such  inequalities 
ought  not  to  be  allowed.  It  is  not  fair  that  he  should 
be  thus  favored."  I  answered:  "Is  it  fair  that  you 
happen  to  be  good  to  look  upon  and  bright  and  attrac- 
tive to  talk  to  (all  of  which  she  was),  while  some  oth- 
ers of  your  sex,  pardon  the  ungallant  observation,  are 
plain  or  dull?  Because  of  this  gross  inequality,  gall- 
ing as  it  must  be  to  some  of  those  less  favored,  do  you 
think  there  should  be  a  law  providing  that  all  women 
must  go  veiled  and  have  other  appropriate  restraints 
put  upon  the  power  of  their  attractiveness?  Do  you 
realize  that  if  all  incomes  above  $100,000  were  con- 
fiscated, as  has  been  urged  by  some,  and  which  in  your 
present  frame  of  mind  you  would  presumably  favor, 
the  resulting  sum  would  barely  cover  our  war  expendi- 
tures for  one  month?  Do  you  know  that  if  all  in- 
comes above  even  $10,000  were  taken  and  distributed 
among  those  earning  less  than  $10,000,  the  result,  as 
far  as  I  can  figure  out,  would  be  that  the  aggregate  in- 


MENACE     OF     PATERNALISM  25 1 

come  of  those  receiving  that  distribution  would  be  in- 
creased barely  ten  per  cent.*?"  I  used  various  other  ar- 
guments and  examples,  not  without  interruption  and 
rejoinder  on  her  part.  I  do  not  flatter  myself  that  I 
succeeded  in  converting  her,  but  I  believe  when  we 
parted  she  was  a  little  less  sure  than  before  that  Mr.  X 
ought  to  be  turned  out  of  his  fine  house  forthwith. 

The  sound  common  sense  of  the  plain  people,  health- 
ily skeptical  of  the  fancies  and  theories  of  "advanced 
thinkers"  or  the  catch-phrases  of  agitators,  may  be 
trusted,  fortunately,  to  look  through  the  folly  of  at- 
tempting to  force  into  a  mold  of  equality  that  which 
nature  has  not  created  equal. 

Watch  a  gang  of  laborers  at  work  and  see  with  what 
lack  of  ceremony  the  foreman  deals  with  the  subject 
of  abstract  "equality." 

Even  Lenine,  that  sinister  arch-apostle  of  enforced 
equality  geared  to  the  standard  of  the  lowest  level  of 
class  selfishness,  made  the  following  admission  in  an 
official  pronouncement  to  his  followers,  in  April  last, 
embodying  one  of  the  lessons  which  he  learned  in  the 
sixth  month  of  his  disastrous  and  blood-stained  rule: 
"We  must  purchase  the  services  of  a  thousand  first 
class  scientists,  specialists  and  managers,  and  even 
though  we  pay  each  of  these  capitalist  stars  25,000, 
50,000  or  even  100,000  rubles  a  year,  they  will  be 
cheap  at  that  price." 

How  much  in  dollars  and  cents,  not  to  mention  in 
comfort,  enjoyment  and  contentment,  is  it  worth,  for 
instance,  to  the  people  that  Mr.  Ford's  genius  in  or- 
ganizing and  manufacturing  has  brought  the  automo- 


252  BUSINESS     AND     ECONOMICS 

bile    within    reach    of   those    with    modest    incomes? 

I  have  complete  confidence  in  the  sober  common 
sense  of  the  American  people.  I  believe  that  when 
they  have  been  placed  in  possession  of  adequate  in- 
formation, when  the  pros  and  cons  of  a  proposition 
have  been  fully  discussed  before  them  and  by  them, 
they  can  always  be  relied  upon  to  reach  sound  conclu- 
sions. I  am  convinced  that,  while  earnestly  and  de- 
terminedly contending  for  social  justice  and  progress 
and  the  greatest  attainable  diffusion  of  well-being,  con- 
tentment and  opportunity,  they  are  not  prepared  to 
abandon  the  principles  and  underlying  features  of  a 
governmental  and  social  system  which  has  created  out 
of  the  heterogeneous  elements  of  our  population  a 
strong  and  great,  self-reliant  and  enterprising  race  and 
procured  for  the  people  prosperity  and  other  advan- 
tages superior  on  the  whole  to  those  possessed  by  any 
other  nation. 

They  will  not,  I  feel  assured,  permit  Americanism  to 
be  adulterated  by  a  spirit  or  by  methods  having  kin- 
ship to  either  world-destructive  Prussianism  or  self- 
destructive  Russianism.  They  will  not,  I  am  certain, 
cast  aside  knowingly  the  theories  and  principles  of  in- 
stitutions which  we  inherited  from  the  wisest  and  most 
enlightened  body  of  men  that  ever  met  in  deliberative 
assembly  and  which  are  the  envy  and  admiration  of 
the  world,  in  exchange  for  a  regime  of  bureaucracy, 
paternalism,  socialism  or  bolshevism. 

And  these  institutions,  the  most  perfect  embodiment 
ever  conceived  of  a  true  and  workable  democracy,  are 
based  upon  the  great  principle  of  individualism  be- 


MENACE     OF     PATERNALISM  253 

cause  the  illustrious  men  who  framed  our  fundamental 
instrument  of  government  were  led  by  a  deep  insight 
into  and  a  wonderfully  sagacious  recognition  of  the 
trend  of  human  affairs  and  the  springs  of  human  ac- 
tions. 

They  indeed  made  America  "safe  for  democracy." 
Let  us  beware  lest  in  aiming  "to  make  the  world  safe 
for  democracy"  we  permit  the  safety  of  democracy  in 
our  own  land  to  be  jeopardized  by  having  the  founda- 
tions tampered  with,  on  which  it  has  rested  for  a  cen- 
tury and  a  half.  By  all  means,  let  us  be  open  to  new 
ideas,  let  us  go  forward  and  strive  to  realize  what  for- 
merly were  considered  unattainable  ideals,  but  in 
boldly  venturing  forth  upon  uncharted  waters  do  not 
let  us  throw  overboard  the  compass  of  immutable  prin- 
ciples. 

V 

The  menace  which  I  see  is  not  in  the  deliberate  will 
of  the  people,  but  in  the  fact  that  under  the  emotional 
stress  of  war,  under  the  patriotic  impulse  of  the  time, 
under  the  actual  or  fancied  necessity  of  the  war  situa- 
tion, tendencies  are  tolerated  and  modes  of  thought  and 
action  permitted  to  gain  a  footing  unopposed,  which 
are  apt  to  create  very  serious  problems  upon  the  return 
of  normal  conditions. 

The  menace  is  aggravated  by  the  fact  that  from  a 
thoroughly  laudable  and  patriotic  desire  to  sustain  the 
Nation's  spokesman  and  chosen  leader  in  the  formi- 
dable difficulty  and  responsibility  of  his  task  of  con- 
ducting the  war,  we  are  all  reluctant  to  raise  controver- 


254  BUSINESS     AND     ECONOMICS 

sies,  and  most  of  us  would  rather  swallow  our  convic- 
tions in  silence,  at  whatever  discomfort  to  our  mental 
digestive  apparatus,  than  place  ourselves  in  a  position 
where  our  patriotism  may  be  doubted  or  our  motives 
suspected  to  be  those  of  a  selfish  concern  for  our  indi- 
vidual or  class  interests,  in  a  time  when  selfishness  is 
almost  treasonable. 

In  what  I  am  going  to  say  I  wish  very  distinctly 
and  earnestly  to  disclaim  any  intention  of  criticising 
our  present  Government.  It  would  be  most  unbecom- 
ing and  improper  to  do  so  before  this  non-partisan  gath- 
ering in  which  politics  can  have  no  place. 

What  I  mean  to  bring  out  is  not  any  sins  of  omis- 
sion or  commission  of  the  present  Administration,  but 
unavoidable  frailties  and  shortcomings  which  are  in- 
herent in  the  very  essence  of  all  government  and  which 
emphasize  the  need,  particularly  in  a  democracy,  of 
confining  the  business  functions  of  government  to  ac- 
tivities which  private  enterprise  cannot  undertake 
equally  as  well  as  or  better  than  the  State,  or  which,  in 
the  interest  of  the  maintenance  of  free  institutions, 
private  enterprise  ought  not  to  be  permitted  to  under- 
take. 

Liberty  necessarily  limits  governmental  efficiency. 
That  is  part  of  the  price  which  we  pay  for  freedom. 
We  do  not  begrudge  the  price.  We  are  prepared  to  pay 
any  price  for  the  supreme  blessing  of  being  free  men 
— if  necessary,  even  the  price  of  our  lives,  as  many  of 
those  did  who  procured  for  us  the  great  legacy  of  lib- 
erty. But  why  unnecessarily  bid  up  the  price  against 
ourselves  by  extending  the  scope  of  governmental  ac- 


MENACE      OF      PATERNALISM  255 

tivities  beyond  the  field  which  naturally  belongs  to 
them  ? 

Government,  in  its  very  essence,  is  the  negation  of 
competition.  It  is,  by  the  very  fact  of  its  being,  what- 
ever its  name  or  kind,  the  monopoly  of  ?nonopolies.  It 
cannot  but  be  affected  with  those  shortcomings  which 
spring  from  the  absence  of  competition  and  the  exercise 
of  monopoly.  Why,  then,  should  a  people  which 
rightly  discountenances  monopoly  and  rightly  believes 
in  the  principles  of  competition,  enlarge  the  operations 
of  governmental  agencies  further  than  is  required  for 
the  recognized  purposes*1  which  a  free  government  is 
meant  to  serve? 

I  do  not  fail  to  recognize  that  certainly  during  the 
period  of  reconstruction,  and  probably  more  or  less 
permanently,  both  here  and  in  Europe,  the  scope  of 
State  activities  is  bound  to  increase  and  that  govern- 
ment must  concern  itself  with,  and  intercede  in,  mat- 
ters which  heretofore  were  left  entirely  to  private  en- 
terprise. But  this  concern  and  intercession  should  be 
such  as  not  to  eliminate,  or  lame,  private  enterprise, 
but  to  make  it  more  effective.  In  this  respect  we  might 
learn  from  the  enemy  through  a  careful  study  of  the 
methods  followed  in  Germany  before  the  war,  some 
of  which  are  worthy  of  adaptation  while  others  must 
be  rejected  as  being  in  contrast  with  our  conception 
of  right  and  morality. 

Nor  do  I  fail  to  recognize,  but,  on  the  contrary,  I 
welcome  unreservedly  the  prospect  that  in  the  times 
which  will  follow  the  profound  upheaval  of  the  war, 
the  standard  by  which  men  will  be  judged  and  re- 


256  BUSINESS     AND      ECONOMICS 

warded  will  be,  more  strictly,  exactingly  and  far- 
reachingly  than  heretofore,  that  of  work  done,  duty 
performed,  service  rendered.  The  world  will  have  no 
place  for  idlers  and  social  slackers.  Rank  will  reside 
not  in  birth  or  wealth — neither,  I  trust,  will  it  reside 
in  an  office  holding  caste — but  in  useful  achievement. 
The  tremendous  event  of  the  war  will  not  leave  the 
world  as  it  found  it.  It  will  never  be  quite  the  same 
again.  To  the  extent  that  social  and  economic  insti- 
tutions, however  deep  and  ancient  their  roots,  may  be 
found  to  stand  in  the  way  of  the  highest  achievable 
level  of  social  justice  and  the  widest  attainable  exten- 
sion of  opportunity,  welfare  and  contentment,  they  will 
have  to  submit  to  change.  And  the  less  obstructive  and 
stubborn,  the  more  broadminded,  co-operative  and  dis- 
interested those  who  pre-eminently  prospered  under  the 
old  conditions  will  prove  themselves  in  meeting  the 
spirit  of  the  new  day  and  the  reforms  which  it  may 
justly  call  for,  the  better  it  will  be  both  for  them  and 
for  the  community  at  large. 

VI 

All  extremes  meet,  as  the  French  saying  is.  From 
governmental  paternalism  to  socialism  is  not  a  very 
long  step.  To  enter  into  a  discussion  of  the  fallacies 
of  socialism  or  of  its  limited  form,  known  as  state  so- 
cialism, would  take  far  more  time  than  even  your 
kindly  indulgence  would  grant  me.  Suffice  it  to  say 
that  the  discoverer  of  the  socialistic  creed  was  a  Ger- 
man and  that  it  bears  all  the  earmarks  of  the  German 


MENACE     OF      PATERNALISM  257 

passion  for  cataloguing  and  scheduling  and  ordering 
men  and  things  in  a  rigid  and  cast-iron  way. 

The  socialistic  conception  is  characteristic  of  the  Ger- 
man trait  of  looking  upon  human  beings  mainly  as  state 
material,  of  failing  to  appreciate  and  respect  the  pas- 
sion for  freedom  among  men  and  nations,  and  of  the 
German's  fundamental  lack  of  enlightened  insight  into 
the  currents  of  human  nature — especially  non-German 
human  nature — which  national  defects  are  among  the 
principal  actuating  causes  that  led  Germany  to  look 
upon  this  war  as  a  winning  venture  instead  of  recog- 
nizing it  as  the  colossal  crime  which  it  is  and  the  equally 
colossal  folly  which  it  was  bound  to  be  for  Germany 
in  its  ultimate  consequences  even  if  it  ended  in  victory 
instead  of,  as  it  will,  in  defeat. 

It  would  be  futile  to  deny  that  some  of  the  credit 
for  the  advance  which  has  been  made  in  the  last  half 
century,  through  legislation  or  otherwise,  toward  social 
justice  and  toward  the  amelioration  of  conditions  which 
the  conscience  of  the  world  ought  never  to  have  toler- 
ated, belongs  to  socialist  suggestion  and  agitation.  To 
the  extent  that  aims  and  measures  advocated  by  So- 
cialism may  still  be  found  to  make  for  the  promotion 
of  public  welfare  as  distinguished  from  selfish  and  nar- 
row and  ill-conceived  class  interest,  they  will  not  fail 
to  achieve  recognition.  It  would  be  equally  futile  to 
shut  our  eyes  to  the  fact  that  not  a  few  of  the  danger- 
ous and  insidious  fallacies  of  Socialism  have  taken  root 
among  individuals  and  sections  of  the  American  peo- 
ple, that  are  far  from  subscribing  to  its  program  as  a 
whole. 


258  BUSINESS     AND     ECONOMICS 

These  fallacies  present  an  issue  which  will  have  to 
be  squarely  met  and  I  believe  can  be  successfully  met, 
as  the  fallacy  of  "free  silver"  was  squarely  and  suc- 
cessfully met  some  twenty  years  ago. 

But  I  see  all  the  less  reason  for  testing  your  pa- 
tience with  a  general  discussion  of  Socialism,  as  I  am 
convinced  that  we  are  not  now  confronted  with  the 
serious  possibility  of  the  approval  by  the  American 
people  of  the  tenets  and  the  program  of  regular  So- 
cialism, as  expounded  by  its  recognized  leaders  whom 
the  test  of  war  has  exposed  as  utterly  un-American,  to 
say  the  least. 

It  is  true  that  a  goodly  number — indeed  too  many 
— of  the  fraternity  of  "intellectuals"  for  a  variety  of 
reasons,  some  deserving  of  respect  and  some  less  so,  are 
flirting  with  or  have  succumbed  to  Socialism,  and  that 
too  many  of  our  youth  in  institutions  of  learning  have 
surrendered  to  its  seductive  appearance,  but  the  bulk 
of  our  people  recoil  from  it  and  the  majority  of  those 
composing  our  labor  unions,  under  the  leadership  of 
Mr.  Gompers,  appear  to  have  recognized  it  for  the  out- 
landish thing  it  is  and  have  thus  far  rejected  its  blan- 
dishments. As  Mr.  Gompers  finely  said  in  one  of  Lis 
speeches  a  number  of  years  ago : 

"I  want  to  tell  you  Socialists  that  I  have  studied 
your  philosophy;  read  your  works  upon  economics,  and 
not  the  meanest  of  them ;  studied  your  standard  works 
both  in  English  and  German — have  not  only  read,  but 
studied  them.  I  have  heard  your  orators  and  watched 
the  work  of  your  movement  the  world  over.  I  have 
kept  close  watch  upon  your  doctrines  for  thirty  years; 


MENACE      OF      PATERNALISM  259 

have  been  closely  associated  with  many  of  you,  and 
know  how  you  think  and  what  you  propose.  I  know, 
too,  what  you  have  up  your  sleeve.  And  I  want  to 
say  that  I  am  entirely  at  variance  with  your  philosophy. 
I  declare  it  to  you,  I  am  not  only  at  variance  with  your 
doctrines  but  with  your  philosophy. 

"Economically,  you  are  unsound;  socially,  you  are 
wrong;  industrially,  you  are  an  impossibility.  .  .  ." 

No  lightning  will  come,  I  believe,  out  of  the  thun- 
der-cloud of  real  Socialism,  for  the  present. 


VII 

The  menace,  however,  of  bureaucratism  and  semi- 
socialistic  paternalism  with  their  insidious  effect  upon 
the  very  fibre  and  marrow  of  the  race,  confronts  us 
now,  and  it  is  none  too  early,  even  in  the  midst  of  the 
all-absorbing  drama  of  war,  for  business  men  to  take 
a  stand  against  their  perpetuation  in  times  of  peace. 
Our  British  business  comrades  have  pointed  the  way. 
Let  me  quote  the  following  passages  from  a  public 
pronouncement  recently  issued  in  London : 

"The  sure  and  certain  result  of  the  present  policy, 
if  persisted  in,  will  be  neither  more  nor  less  than  the 
utter  ruin  of  the  established  business  of  a  very  consid- 
erable section  of  the  community,  a  section  noted  for 
its  energy  and  enterprise,  and  the  jeopardizing  of  our 
whole  foreign  commerce  by  the  deliberate  scrapping  of 
the  organizations  of  proved  efficiency  and  adaptability 
through  which  it  has  hitherto  been  conducted,  and  the 
substitution  for  these  of  an  immense  bureaucratic  or- 


26(3  BUSINESS     AND      ECONOMICS 

ganization,  which  will  certainly  kill  all  individual  in- 
itiative and  enterprise.   .   .   . 

"The  Iron,  Steel,  Tinplate,  and  Metal  Merchants 
of  this  country,  recognizing  the  serious  state  into  which 
the  nation's  trade  is  surely  drifting,  have  formed  them- 
selves into  a  Federation.  .  .  .  They  invite  the  other 
classes  of  the  merchant  trading  community  to  form 
similar  federations  with  the  same  objects.  .  .  . 

"They  consider  that  these  Government  departments, 
which  were  set  up  for  war  conditions  only  (and  which 
would  not  otherwise  have  been  tolerated  for  a  week), 
desire,  if  possible,  to  perpetuate  their  existence,  and  if 
they  are  allowed  to  have  their  way  now  they  will 
wreck  the  whole  system  upon  which  our  world-wide 
trade  has  been  built  up  and  established." 

It  may  be  stated  as  an  axiom  that  while  bureaucracy 
and  efficiency  may  go  together  under  an  autocratic 
regime,  it  is  impossible  in  the  very  nature  of  things  for 
bureaucracy  to  go  together  with  efficiency  in  a  democ- 
racy. Nor,  indeed,  can  paternalism  and  liberty  exist 
side  by  side. 

"But  how  do  you  reconcile,"  I  may  be  asked,  "this 
statement  with  what  you  said  a  little  while  ago  about 
the  efficiency  of  our  democratic  army'?" 

My  answer  is  that  the  efficiency  of  our  Expedition- 
ary Force  (I  spoke  of  our  army  in  Europe,  not  of  the 
Bureaus  at  home,  with  the  workings  of  which  I  have 
had  little  occasion  to  familiarize  myself)  is  not  a  con- 
tradiction of,  but  a  confirmation  of  my  thesis.  Indi- 
vidual responsibility,  rapidity  of  decision,  obedience, 
discipline,  esprit  de  corps,  unquestioning  submission  to 
established  authority,  complete  merging  of  self  in  the 


MENACE     OF      PATERNALISM  26 1 

task  on  hand  are  the  very  essence  of  military  service 
in  war  time.  The  rule,  and,  generally  speaking,  the 
practice  is  promotion  according  to  merit,  selection  ac- 
cording to  qualifications.  Political  pull  and  interfer- 
ence have  been  notably  absent  since  our  army  took 
the  field.  Were  these  things  not  so,  the  army  could 
achieve  little,  whatever  the  bravery  of  all  ranks. 

Will  any  one  say  that  this  is  a  picture  of  the  habitual 
frame  of  mind  and  disposition  of  our  civilian  popula- 
tion or  of  the  practices  of  our  Government,  Demo- 
cratic or  Republican,  in  ordinary  times'? 

We  all  know  it  is  not,  and  it  never  will  be,  a  life- 
like picture  of  us  in  our  normal  state.  "Never"  is  a 
big  word,  but  if  the  experience  of  many  centuries  may 
be  taken  as  a  guide,  it  may  safely  be  applied  to  cer- 
tain essential  qualities  of  human  nature,  excepting  tem- 
porary conditions  when,  under  the  impulse  of  a  great 
emergency,  the  floodgates  of  what  is  highest  and  no- 
blest in  man  are  opened  and  the  mighty  current  carries 
us  along  to  regions  not  ordinarily  within  our  power 
to  attain. 

What  are  the  elements  which  compose  our  govern- 
mental agencies — executive,  legislative  and  adminis- 
trative— including  those  instruments  of  government 
which  of  late  years  have  become  more  and  more  nu- 
merous and  important,  i.e.,  commissions  and  boards'? 

Far  be  it  from  me  to  wish  to  reflect  upon  the  ability, 
the  character  and  the  motives  of  our  public  servants 
in  general.  Indeed  it  is  my  conviction  that,  generally 
speaking,  their  standard  of  capacity,  industry,  devo- 
tion to  duty  and  conscientious  effort  to  seek  the  right 


262  BUSINESS     AND      ECONOMICS 

and  to  promote  the  people's  welfare  is  deserving  of  a 
good  deal  more  recognition  than  is  usually  accorded 
to  it.  But,  surely,  no  candid  estimate  would  claim 
that  acquaintance  with,  and  experience  in,  handling 
large  business  affairs — let  alone  international  business 
affairs — are  prevalent  in  normal  times  among  those  in 
executive,  legislative  and  administrative  offices  in  our 
country. 

Now,  you  and  I,  who  are  trained  in  business,  have 
all  we  can  do  to  conduct  our  respective  concerns  and 
personal  affairs  with  a  fair  measure  of  success.  On 
what  ground,  then,  can  it  be  assumed  that  by  becom- 
ing endowed  with  the  dignity  of  a  governmental  ap- 
pointment, men  of  average  or  even  much  more  than 
average  ability  will  develop  the  capacity  to  run  suc- 
cessfully the  huge  and  complex  business  undertakings 
which  the  devotees  of  paternalism  would  place  in  their 
charge?  I  know,  of  course,  the  arguments  of  the 
preachers  and  prophets  of  governmental  assumption 
of  divers  functions  heretofore  belonging  to  private  en- 
terprise. I  know  their  denunciation  of  what  they  con- 
sider the  selfishness,  the  greed,  the  oppression,  the  eco- 
nomic waste  and  social  injustice  of  the  established  or- 
der of  business,  and  the  sweeping  conclusions  they 
draw  from  the  scandals  or  abuses  which,  from  time  to 
time,  in  sporadic  cases,  have  unfortunately  demeaned 
the  conduct  of  such  business. 

But  granting  some,  granting,  for  argument's  sake, 
many  or  even  all  of  their  allegations,  would  a  regime 
of  paternalism  and  bureaucracy  afford  the  remedy? 
Do  they  find  support  in  history,  ancient  and  modern, 


MENACE     OF     PATERNALISM  263 

for  their  plea?  Have  our  city  administrations  (and 
to  run  a  city  is  essentially  little  different  from  running 
a  business  organization)  been  such  as  to  show  superi- 
ority over,  or  equality  with,  private  enterprise?  Has 
the  management  of  our  postal  department,  which  is 
purely  a  business  proposition  and  an  easy  one  at  that? 

Is  it  conceivable  that  an  army  of  Government  clerks 
such  as  a  bureaucracy  would  have  to  create,  with  its 
deadening  routine  and  its  absence  of  incentive,  could 
come  anywhere  near  equalling  in  efficiency  and  initia- 
tive the  private  employees  stimulated  by  the  inevitable 
and  never-ceasing  search  and  demand  for  capable  men, 
which  is  bound  to  bring  the  ablest  to  the  top  in  private 
business  and  to  reward  them  with  position  and  com- 
pensation? 

Has  our  civil  service  brought  men  to  cabinet  or  other 
leading  positions  as  the  great  majority  of  our  leading 
men  in  business  have  risen  from  the  ranks? 

Has  the  State  anywhere  or  at  any  time  produced  re- 
sults comparable  with  the  best  of  those  produced  by 
private  effort,  taking  into  account  both  efficiency  and 
economy?  Have  its  officials  shown  themselves  amen- 
able to  new  ideas?  Have  they  encouraged  or  even 
recognized  new  inventions?  Have  they  fostered  initia- 
tive? 

I  do  not  wish  to  weary  you  with  a  string  of  sim- 
ilar questions  which  could  be  prolonged  to  almost  in- 
finite length,  and  the  answer  to  all  of  which  is  em- 
phatically "No." 

Bureaucracy  is  either  wasteful,  stagnant  and  ineffi- 
cient or,  when  it  is  efficient,  as  in  Germany,  ruthless  in 


264  BUSINESS     AND      ECONOMICS 

its  methods,  obnoxious  in  its  spirit,  and  morally  poison- 
ous in  its  effect.  Bureaucracy  resents  progress,  vision 
and  innovation  because  these  are  disturbing  and  an- 
tagonistic to  the  very  essence  of  its  being — routine. 

An  English  writer  has  pointed  out  as  a  characteris- 
tic fact  that  Columbus  was  disbelieved,  turned  down 
and  sneered  at  by  all  the  bureaucracy  of  his  day  and 
country,  and  that  it  was  two  private  patrons  who  en- 
abled him  to  realize  his  vision.  Bureaucracy  has 
hardly  changed  since  then  in  its  essentials. 

In  our  own  case  the  soil  for  the  growth  of  the  nox- 
ious weeds  which  spring  from  the  seed  of  bureaucracy 
is  particularly  fertile,  for  a  variety  of  reasons.  One  of 
them  consists  in  the  fact  that  our  capital  city  is  not, 
as  are  the  other  principal  capitals  of  the  world,  a  great 
commercial  city,  but  is  located,  figuratively  speaking, 
on  a  back-water,  away  from  the  great  and  fast  flowing 
currents  of  commerce  and  industry  and  their  attend- 
ant activities,  and  out  of  contact  with  the  doers  of 
things. 

The  result  is  that  Washington  is  heavy  with  the  at- 
mosphere of  politics  and  pervaded,  as  no  other  capital 
I  know,  with  the  spirit  and  the  very  odor  of  things 
governmental.  We  are  all  more  or  less  creatures  of 
our  surroundings,  and  instances  will  occur  to  most  of 
you  of  the  changes  which  the  atmosphere  of  Wash- 
ington has  wrought  upon  men  whose  mental  processes 
and  tendencies  of  thought  and  action  we  thought  we 
knew  thoroughly  well  and  whom  we  believed  proof 
against  such  influences. 

Another  thing,  more  or  less  peculiar  to  our  political 


MENACE     OF      PATERNALISM  265 

ways  and  fatal  to  the  attainment  of  governmental  ef- 
ficiency of  a  high  order,  is  the  custom  of  changing 
officials  with  a  change  of  administration.  Of  course, 
a  great  many  Government  employees  are  protected  in 
their  tenure  by  civil  service  rules,  but  a  considerable 
number — and  those  the  most  important  ones — are  not. 

Moreover,  because  of  the  lack  of  scope  for  their  am- 
bitions, the  insufficiency  of  material  incentive,  the  vexa- 
tions of  red  tape  and  for  sundry  other  reasons,  it  is  a 
well-known  fact  that,  generally  speaking,  many  of  the 
best  men  do  not  remain  in  the  Government's  service  for 
any  great  length  of  time,  while  the  less  competent,  and 
particularly  the  least  competent  ones,  hang  on  forever, 
snugly  fixed  in  governmental  berths. 

This  is  precisely  the  reverse  of  the  ways  of  private 
business,  these  ways  being  continuity  of  direction  and 
policy,  incentive  and  reward  and  permanency  of  ten- 
ure for  the  man  of  ability,  and  weeding  out  of  the  in- 
competent ones. 

A  characteristic  instance  of  the  protean  changeable- 
ness  of  governmental  bodies  is  afforded  by  the  Federal 
Trade  Commission.  This  institution,  which  was  cre- 
ated but  four  years  ago,  is  charged  with  functions  for 
the  effective  fulfilment  of  which  stability  of  personnel 
and  consistency  of  policy  and  program  are  absolutely 
essential.  Yet,  not  a  single  one  of  the  original  ap- 
pointees remains  today  on  the  Commission.  Its  policy, 
methods  and  conceptions  have  been  utterly  and  rad- 
ically reversed  in  the  space  of  a  few  years. 

An  American  bureaucracy,  if  paternalism  were  to  be 
permitted  to  strike  root  in  our  country,  having  the  cen- 


266  BUSINESS     AND      ECONOMICS 

ter  of  its  being  in  Washington,  would  be  apt,  there- 
fore, to  become  a  most  characteristic  sample  of  the 
foibles,  defects  and  drawbacks  which  the  bureaucratic 
species  is  heir  to. 

Even  under  existing  conditions,  with  the  quickening 
effect  of  war  upon  administrative  activity,  the  time 
and  effort  spent  by  business  men  in  traveling  to  what 
for  the  present  has  become  the  center  of  all  dispensa- 
tions— Washington, — in  hanging  around  departmental 
bureaus,  seeking  the  man  or  the  committee  authorized 
to  make  decisions,  trying  to  get  attention  and  action, 
and  so  forth,  amounts  to  an  appalling  total  of  lost 
energy.  A  recently  published  report  by  one  of  the 
Senate  committees  contains  the  following  passage,  de- 
scriptive of  the  workings  of  bureaucracy : 

".  .  .  .  functions,  ill-defined,  conflicted  with  or 
overlapped  each  other.  Contractors,  inventors,  ma- 
terial men,  every  one  having  business,  .  .  .  directed 
from  one  official  to  the  other,  could  not  well  transact 
their  business  and  secure  results  with  directness  and 
efficiency.  While  this  condition  seems  to  be  inseparable 
from  official  business  routine  in  Washington,  etc.  .  .  ." 

As  bearing  upon  the  question  of  transferring  busi- 
ness functions  from  private  control  to  Government  con- 
trol, I  need  hardly  enter  into  the  subject  of  the  vastly 
increased  cost  which  such  a  transfer  would  involve, 
because  governmental  extravagance  and  costliness  of 
method  have  become  proverbial.  It  was  Senator  Aid- 
rich — a  man  in  the  habit  of  weighing  his  words — who 
said,  on  the  strength  of  many  years'  experience  with, 
and  observations  of,  public  affairs,  that  if  our  govern- 


MENACE      OF      PATERNALISM  267 

mental  expenditures  could  be  administered  on  the  prin- 
ciples and  methods  prevailing  in  private  business,  the 
cost  to  the  people  could  be  reduced  by  three  hundred 
million  dollars  a  year.  Bear  in  mind  that  this  was 
said  at  a  time  when  our  expenditures  were  normal,  and 
then  apply  it  to  expenditures  immensely  enlarged. 

VIII 

To  win  the  war  and  to  deal  with  the  problems  in- 
cident to,  and  resulting  from  it,  bravery  and  patriotic 
devotion  alone  are  not  sufficient.  Reason  must  check 
emotion,  reflection  must  curb  impulse.  Sober  and  ear- 
nest thought  is  called  for  and  the  moral  courage  to 
speak  one's  convictions,  with  the  sole  limitation  that 
they  must  be  the  convictions  of  a  loyal  American  and 
not  such  as  are  calculated  when  uttered  to  give  aid 
and  comfort  to  the  enemy  or  such  as  tend  to  weaken  the 
nation's  war  effort  and  determination  to  achieve  com- 
plete victory. 

It  is  easy  to  float  with  the  prevailing  surface  cur- 
rents of  the  day,  and  tempting  to  attune  one's  utter- 
ances to  sentiments  which  are  sure  to  meet  with  popu- 
lar applause.  But  the  value  of  an  exchange  of  views 
lies  in  the  difference  of  views  honestly  held  and  pre- 
sented. It  is  through  free  discussion,  through  the 
meeting  of  conflicting  opinions  in  the  public  forum, 
that  the  truth  is  sought  and  ascertained  in  a  democracy. 

Truth  is  a  stubborn  and  exacting  thing.  She  will 
respond  neither  to  the  stormy  wooing  of  the  visionary 
nor  to  the  more  subdued  call  of  selfishness.    We  busi- 


268  BUSINESS     AND     ECONOMICS 

ness  men  shall  not  be  accused  of  following  visionary 
aims.  Nor,  on  the  other  hand,  are  we  any  more  selfish 
than  is  inherent  in  the  imperfections  of  average  hu- 
man nature.  But  what  the  time  imperatively  calls 
for  is  that  we  rise  above  our  normal  selves,  that  to  the 
best  of  our  conscience  and  ability  we  cast  aside  self- 
interest  and  class  interest  and  that  we  merge  ourselves 
in  the  great  and  high  task  to  which  the  nation  has  set 
its  hand. 

It  is  with  a  full  appreciation  of  this  obligation  rest- 
ing upon  every  one  of  us — and  especially  those  of  us 
who  for  the  moment  are  permitted  to  speak  publicly 
to  and  for  business  men — and  with  an  earnest  desire 
to  meet  this  obligation  to  the  best  of  my  conscience 
and  judgment  that  I  have  reached  the  views  and  con- 
clusions which  I  have  ventured  to  express  before  this 
influential  body. 

The  other  day,  I  heard  a  distinguished  labor  leader 
make  a  statement  which,  as  far  as  I  have  retained  it  in 
my  memory,  runs  as  follows : 

"I  have  always  done,  and  shall  always  do  my  ut- 
most to  bring  about  the  maximum  of  democracy,  of 
social  justice,  and  of  opportunity  for  all  and  to  estab- 
lish the  very  best  possible  conditions  for  the  masses  of 
our  people,  to  the  extent  that  these  things  do  and  can 
conform  to  the  practically  attainable  at  the  time  with- 
out doing  more  harm  than  good.  To  the  extent  that 
they  are  not  so  attainable,  I  am  willing  to  discard 
them  or  defer  them  to  a  more  propitious  time." 

I  wholly  subscribe  to  this  promise  and  I  do  not 
see   how    any   genuine    adherent    of   democracy    and 


MENACE     OF     PATERNALISM  269 

well-wisher  of  humankind  can  fail  to  subscribe  to  it. 
A  few  days  later  I  came  across  an  article  by  that 
gifted  and  clear-thinking  statesman,  Senator  William 
E.  Borah,  in  which,  referring  to  tendencies  which  would 
make  of  the  United  States  "a  Republic  in  form  but 
a  bureaucracy  in  fact,"  he  uses  the  following  language : 

"It  may  be  possible  to  devise  some  system  of  govern- 
ment more  deadening  to  individual  initiative,  more 
destructive  to  human  progress,  more  burdensome  to  the 
people  than  a  bureaucracy,  but  so  far  God,  in  His 
infinite  mercy,  has  not  permitted  it  to  curse  the  human 
family.  Up  to  date,  the  worst  of  all  forms  of  govern- 
ment is  a  bureaucracy." 

And  to  that  also  I  subscribe. 

The  picture  of  bureaucratic  paternalism  fastening  its 
shackles  upon  a  nation,  which  went  to  war  to  preserve 
liberty,  is  not  a  fanciful  one.  Through  the  accident  of 
war,  paternalism  at  present  rules  supreme.  That  is 
inevitable  in  war  time. 

The  one  and  supreme  task  before  the  nation  is  to 
win  the  war.  No  personal  or  business  consideration 
must  be  permitted  to  stand  in  the  way  of  the  necessi- 
ties of  that  task,  and  no  one  must  for  one  moment  hesi- 
tate to  submit  to  them. 

We  are  not  criticizing  or  complaining  of  the  present 
facts,  we  are  thinking  of  the  future.  Officialdom  is  in 
possession.  It  is  entrenched  in  power  beyond  what  it 
dared  to  hope  for  in  its  fondest  dreams.  And  power  is 
sweet.  Officialdom  and  those  who  feed  at  its  table  will 
not  easily  give  it  up.  It  is  but  human  nature  that  they 
should  come  really  to  believe  and  endeavor  to  induce 


270  BUSINESS     AND      ECONOMICS 

the  people  to  believe  that  it  is  for  the  best  to  leave  in  the 
Government's  charge  permanently  much  of  that  which 
has  been  confided  to  it  in  the  stress  of  the  emergency  of 
war. 

Bureaucracy  has,  and  will  have,  an  array  of  plausi- 
ble arguments  to  support  its  plea.  I  heard  a  Govern- 
ment official  claim  dramatically  in  the  course  of  a 
speech  before  a  great  meeting: 

"If  such  and  such  a  measure  is  good  enough  for  us 
to  adopt  in  war  times,  when  our  sons  and  brothers  are 
offering  their  lives  abroad,  why  is  it  not  good  enough 
for  us  to  continue  to  have  in  peace  time,  when  our 
sons  and  brothers  will  again  be  leading  their  lives  in 
our  midst?" 

The  answer  is,  of  course,  that  war  is,  fortunately,  an 
utterly  abnormal  condition  and  that  much  of  what  is 
appropriate  and  needful  in  war  times  is  inapplicable, 
harmful  and  even  pernicious  in  peace  times.  But  the 
answer  was  not  given,  and  the  orator's  question  was 
greeted  with  approving  applause. 

Paternalism,  under  a  variety  of  names  and  disguises, 
will  have  the  support  of  the  vast  army  of  those  who 
live  or  hope  to  live  on  its  huge  patronage.  It  will  have 
the  support  of  the  popularity-seeker,  the  opportunist 
and  the  demagogue ;  of  many  who  are  rightly  desirous 
to  further  social  justice,  but  do  not  go  to  the  effort  of 
painstakingly  studying  and  critically  examining  in  the 
light  of  reason  and  experience,  the  ways  and  means 
which  are  available  to  that  end  without  doing  more 
harm  than  good,  and  of  some  who  are  moved  by  envy 


MENACE      OF      PATERNALISM  27 1 

(consciously  or,  more  often,  unconsciously)  toward 
those  who  have  been  materially  successful. 

It  will  have  the  support  of  numerous  dwellers  in  air 
castles  who  want  to  see  the  world  regulated  and  or- 
dered after  the  pattern  of  their  dreams,  and  of  the  so- 
cialist who  sees  in  the  assumption  by  the  Government 
of  various  functions  heretofore  left  to  private  enter- 
prise, and  of  various  regulating  activities  heretofore 
left  to  the  free  play  of  economic  forces,  the  first  step 
toward  the  adoption  and  realization  of  his  full  pro- 
gram. 

The  movement  will  be  countenanced  by  many  who 
do  not  sufficiently  appreciate,  in  the  face  of  the  lessons 
of  all  history,  ancient  and  modern,  that  the  only  free 
government  which  ever  has  lasted,  or  ever  can  last,  was 
and  is  a  government  which  gives  the  broadest  scope 
to  the  individual,  limited  only  by  equally  broad  but 
wisely  conceived  regard  for  the  general  welfare. 

Liberty  means  neither  uniformity  nor  the  rule  of 
mediocrity.  Liberty  is  strong  enough  and  conscious 
enough  of  its  strength  not  to  fear  but  to  foster  individ- 
ual capacity.  If  political  liberty  is  not  the  sum  of  in- 
dividual liberties,  fairly  ordered  and  reasonably  re- 
strained, it  is  not  liberty  at  all. 

It  would  be  a  tragedy,  if  it  were  to  be  permitted  that 
while  our  boys  are  fighting  for  liberty,  the  great  and 
splendid  structure  of  ordered  and  enlightened  freedom 
and  covenanted  individual  rights,  which  was  handed 
down  to  all  Americans,  should  be  invaded  by  that  most 
insidious  foe  of  liberty,  paternalism,  with  its  allies  and 
close  relatives,  bureaucracy  and  socialism. 


272  BUSINESS     AND     ECONOMICS 

It  would  be  a  grievous  affliction  if  under  the  emo- 
tional stress  and  turmoil  produced  by  war,  our  people 
were  to  tolerate  doctrines  to  take  a  footing  on  our  soil 
which  their  sober  wisdom  heretofore  has  scornfully  re- 
jected as  will-o'-the-wisps  and  as  un-American. 

It  would  be  bitter  irony  of  fate  if,  while  democracy 
triumphed  on  the  bloody  fields  of  war  over  that  arch 
representative  of  the  paternalistic  system  and  spirit, 
Germany,  our  own  governmental  and  social  concep- 
tions and  practices  were  to  be  infected  with  the  Prus- 
sian poison  of  paternalism  and  bureaucracy. 

The  illustrious  men  who  founded  the  United  States 
of  America  gave  us  the  wisest  instrument  of  govern- 
ment which  the  wit  of  man  has  ever  devised.  Glad- 
stone called  it  "the  most  wonderful  work  ever  struck 
off  at  a  given  time  by  the  brain  and  purpose  of  man." 
A  great  British  jurist  referred  to  it  as  "the  bulwark  of 
American  individualism."  Faith  in  individual  effort, 
and  the  aim  to  give  it  incentive  and  protection  are  of 
its  very  warp  and  woof. 

Under  that  instrument  this  Republic,  through  test 
and  trial  and  storm,  has  lived  for  near  a  century  and 
a  half — a  space  of  time  far  longer  than  any  other  gen- 
uine republic  has  ever  endured.  While  prospering  ma- 
terially beyond  all  parallel,  it  has  maintained  high  and 
noble  ideals.  While  devoted  to  the  arts  of  peace,  it 
has  preserved  its  sturdy  virility  and,  whenever  called 
upon,  has  splendidly  demonstrated  its  undiminished 
martial  prowess.  It  has  been  the  land  of  opportunity,, 
beckoning  to  and  drawing  hither  men  and  women  from 
all  countries  of  the  world. 


MENACE      OF      PATERNALISM  273 

We  do  not  pretend  that  it  has  achieved  perfection  in 
its  social  conditions,  we  earnestly  desire  ever  further 
progress  toward  that  end,  but  we  do  claim  that  it  has 
offered  and  offers  to  the  masses  of  its  people  a  fairer 
and  larger  field  and  more  of  reward  and  of  well-being 
than  exists  anywhere  else.  It  is  the  task  and  the  duty 
of  all  men  and  women  having  a  stake,  material  or 
spiritual,  in  the  present  and  future  of  the  nation,  to 
resist  those  who  would  remove  or  loosen  the  cornerstone 
on  which  our  institutions  rest — individual  effort.  And 
among  those  who  are  called  to  that  task  and  that  duty, 
the  business  men  of  America  have  a  leading  place. 

We  yield  to  none,  either  in  the  intensity  of  our  pa- 
triotism or  in  the  earnestness  of  our  desire  to  bring 
about  the  greatest  attainable  well-being  for  all  the 
people.  We  look  ahead,  after  victory  and  peace  shall 
have  been  achieved,  to  a  forward  movement,  to  an  ever 
more  widely  diffused  prosperity,  to  opportunities  and 
achievements  in  the  field  of  the  material  as  well  as  of 
the  ideal,  such  as  has  rarely  fallen  to  the  lot  of  any  peo- 
ple, provided  always  that  our  country  remains  stead- 
fast to  its  tried  and  tested  principles  and  time-honored 
traditions,  wisely  and  fairly  and  progressively  adjust- 
ing their  application  to  the  needs  of  the  day. 

To  that  end,  we  must  stand  together,  counsel  with 
each  other  and  work  together.  We  must  give  voice  to 
our  convictions.  We  must  become  a  militant  phalanx 
in  the  cause  of  that  which  we  profoundly  believe  to  be 
right  and  wise  and  just  and  making  for  the  greatness 
of  America  and  the  happiness  and  welfare  of  her  peo- 
ple. 


274  BUSINESS      AND      ECONOMICS 

We  are  living  in  a  portentous  time,  big  with  the  des- 
tiny of  the  world,  for  good  or  ill,  for  generations  to 
come.  The  problems  of  the  immediate  future  loom 
large  before  us.  That  nation  which  will  best  know 
how  to  combine  the  dictates  of  social  justice  with  incen- 
tive and  protection  to  individual  effort  will  secure  the 
prize  of  world  leadership  no  less  than  of  opportunity, 
well-being  and  contentment  for  the  masses  of  its  own 
people. 

Some  fifty  years  ago,  President  Lincoln  addressed 
these  words  to  Congress : 

"You  cannot,  if  you  would,  be  blind  to  the  signs  of 
the  times.  I  beg  of  you  a  calm  and  enlarged  considera- 
tion of  them,  ranging,  if  it  may  be,  far  above  personal 
and  partisan  politics.  ...  So  much  good  has  not  been 
done,  by  one  effort,  in  all  past  time,  as  in  the  Prov- 
idence of  God  it  is  now  your  high  privilege  to  do.  Ma3' 
the  vast  future  not  have  to  lament  that  you  have  neg- 
lected it." 

Our  collective  responsibility  as  well  as  the  individ- 
ual responsibility  of  every  patriotic  and  thoughtful 
American  is  heavy  indeed  in  the  face  of  the  times  and 
the  signs  of  the  times.  Well  may  we  pray  that  the 
spirit  of  that  noble  invocation  and  the  tolerance  and 
moderation,  the  deep  human  understanding  and  wise, 
dispassionate  vision  of  the  immortal  American  who  ut- 
tered it,  may  lead  and  inspire  the  American  people  and 
those  constituted  by  them  in  authority,  in  the  trials  of 
the  present  and  the  perplexities  of  the  future. 

Well  may  we  pray  that  we  be  vouchsafed  the  guid- 


MENACE      OF      PATERNALISM  275 

ance  of  that  spirit  both  in  the  solemn  days  of  sacrifice 
and  consecration  through  which  we  are  passing,  and 
in  the  high  task  of  making  fruitful,  for  the  good  of  our 
own  country  and  of  all  the  world,  the  victory  and  the 
triumph  which  will  crown  our  righteous  cause. 


A: 


THE  TASK  AHEAD 


.BOUT  eight  months  ago,  I  came  back  from  a  stay 
in  England  and  France.  It  so  happened  that  I  re- 
turned on  a  transport,  being  convoyed  only  a  short 
distance  out,  and  it  so  happened  that  it  was  the  month 
in  which  the  German  submarines  were  making  the  ocean 
voyage  particularly  unpleasant,  because  they  were  sup- 
posed to  be  roving  right  across  the  Atlantic  from  the 
European  to  the  American  shore.  We  had  various 
reminders  during  the  journey  as  to  the  disagreeable  sea 
habits  of  the  Hun.  There  were  several  alarms,  and,  al- 
together, it  was  not  exactly  a  pleasure  trip.  However, 
we  got  home  safely,  and  as  we  were  being  pushed  into 
our  dock  at  New  York  and  I  was  standing  around  on 
the  deck,  waiting,  a  begrimed  stoker  stuck  his  head  out 
of  one  of  the  gangways  and  began  talking  to  me.  With 
the  unceremonious  directness  of  the  seafaring  man,  he 
started  in :  "Say,  I  hear  you  are  one  of  them  rich  Wall 
Street  fellows."  I  admitted  that  I  had  been  reasonably 
successful  and  acknowledged  that  I  was  a  Banker. 
"Well,"  he  inquired,  "would  you  have  as  much  as  a 
million  dollars?"  Thinking  of  the  income  tax  and 
having  in  mind  the  disguises  of  Sherlock  Holmes,  I 
gave  a  carefully  guarded  reply.  However,  he  took  it 
for  an  affirmation  and  continued:    "If  I  had  a  million 


An  address  delivered  at  the  Twenty-third  Celebration  of  Founder's 
Day  at  the  Carnegie  Institute,  Pittsburgh,  Pa.,  April  24,  1919. 

276 


THE      TASK     AHEAD  277 

dollars  I  would  not  be  seen  on  this  ocean  nowadays, 
where  you  might  be  blowed  up  any  minute."  "Well," 
I  said,  "I  had  some  duties  to  attend  to  on  the  other  side, 
and  I  had  to  go."  He  replied  imperturbably :  "If  I 
had  a  million  dollars,  I  would  hire  some  one  to  attend 
to  my  duties  for  me."  "Hold  on,  my  friend,"  I  said, 
"let's  argue  this  a  minute.  I  had  a  cabin  amidships  on 
the  upper  deck,  with  plenty  of  life-belts  around  me, 
right  opposite  one  of  the  life-boats.  If  anything  hap- 
pened, the  chances  were  at  least  two  to  one  that  I 
would  come  off  all  right.  You  are  down  in  the  stoke- 
hole. If  the  Huns  get  the  ship  the  chances  are  against 
you.  You  are  quite  liable  to  be  hit  or  drowned.  Now, 
from  your  appearance  it  is  evident  that  you  are  beyond 
the  draft  age.  You  could  get  a  good  and  safe  job  on 
land  in  a  munition  factory  or  somewhere  else,  paying 
you  at  least  as  much  as  you  get  now,  probably  more. 
Why  do  you  stay  on  this  ship1?  Why  don't  you  quit 
such  dangerous  business*?"  He  looked  straight  at  me 
and  drew  himself  up  and  said,  "Well,  who  would  run 
the  damned  ships  if  we  all  felt  that  way*?  I  ain't  no 
white-livered  skunk.  I  have  a  duty  to  the  country." 
And  then  we  shook  hands. 

THE  KEY-NOTE 

Now,  ladies  and  gentlemen,  "Duty  to  the  country" 
— that  is  the  key-note.  It  was  that  sentiment  gather- 
ing compelling  strength  and  taking  precedence  over 
every  other  consideration  with  every  true  American, 
whatever  his  station  in  life, — it  was  that  which  gave 
us  victory,  which  gave  us,  together  with  our  heroic 


278  BUSINESS     AND      ECONOMICS 

Allies,  the  triumph  as  the  result  of  which  autocracy  lies 
shattered  and  whining  at  the  feet  of  the  free  nations  of 
the  world.  It  was  that  sentiment  of  duty  to  the  coun- 
try, which  steeled  our  men  when,  in  March,  1918,  dur- 
ing the  gloomy  and  trying  days  of  the  British  retreat  in 
Flanders,  600  American  Engineers,  who  were  not  meant 
to  be  fighters,  threw  down  their  tools  and  took  up  rifles 
and,  together  with  their  British  comrades,  held  a  vital 
portion  of  the  lines  for  six  long  and  bloody  days,  un- 
aided by  either  artillery  or  machine  guns !  It  was  that 
same  sentiment  which  fired  our  troops  when  in  the  first 
important  action  by  Americans  in  the  war  they  took 
Cantigny  and  held  it  against  fierce  assaults  over  and 
over  repeated,  by  German  shock  troops,  particularly  se- 
lected to  give  a  lesson  to  those  green,  presumptuous 
Americans!  It  was  that  same  sentiment  which  ani- 
mated our  marines  and  other  soldiers  in  the  immortal 
fighting  at  Chateau-Thierry  and  Belleau  Wood  in  the 
first  week  of  last  June.  I  was  in  France  at  the  time, 
and  I  know  that  it  is  no  vain  boast  when  I  say  that 
that  action,  and  the  eloquent  demonstration  it  afforded 
of  American  fighting  qualities,  marked  the  turning  of 
the  tide  and  set  victory  on  its  way. 

It  was  that  same  compelling  sense  of  "duty  to  the 
country"  which  nerved  our  boys,  many  of  them  green 
recruits,  with  their  Australian  comrades,  to  break  what 
was  perhaps  the  most  formidable  part  of  the  Hinden- 
burg  Line,  and  which  carried  them  through  the  terrible 
fastnesses  of  the  Argonne  Forest.  And  it  was  that  sen- 
timent and  that  spirit  which  inspired  everybody  at  the 
front  as  well  as  at  home  to  patriotic  devotion  and  will- 


THE     TASK     AHEAD  279 

ing  sacrifice — everybody  except  an  insignificant  few 
who  were  not  spiritually  Americans  and  therefore  not 
actually  Americans,  whatever  the  place  of  their  birth. 

Now,  the  Morning  After  has  come !  It  brings  us  a 
test  of  the  staying  power  of  our  patriotism.  The  fire 
and  the  enthusiasm  born  of  war  are  no  longer  with  us. 
We  no  longer  walk  along  the  heights  of  the  inspiration 
born  of  great  and  stirring  events.  We  have  returned 
into  the  valleys  of  every-day  workaday  life.  Grave  and 
immediate  problems  confront  us.  I  do  not  say  this 
in  gloom.  On  the  contrary,  I  never  looked  forward 
with  greater  assurance  to  prosperity  and  progress  and 
enhanced  well-being  for  all.  The  croaking  of  the 
pessimist,  the  noise  and  turmoil  and  the  threats  of  the 
agitator  do  not  frighten  me  in  the  least.  But  these 
problems  do  challenge  our  wisdom,  our  self-restraint 
and  our  capacity  for  purposeful,  united  action. 

One  hundred  and  fifty  years  ago,  America  showed  to 
the  world  the  way  to  government  of  covenanted  and 
orderly  freedom.  When  this  republic  was  founded,  it 
was  the  only  republic  in  the  world  that  deserved  the 
name.  Its  system  of  government,  bestowed  upon  the 
country  by  the  wisest  and  most  enlightened  men  that 
ever  framed  an  instrument  of  government,  has  been 
shown  in  the  course  of  a  century  and  a  half  to  be  more 
effective  in  making  for  the  welfare  and  happiness  of 
the  people  than  any  other.  By  adhering  steadfastly, 
yet  in  a  spirit  of  progress,  to  the  doctrines  and  principles 
on  which  our  institutions  rest,  we  shall  demonstrate 
once  more  the  blessings  and  the  benefits  to  all  of  or- 


280  BUSINESS     AND     ECONOMICS 

dered  liberty  as  bequeathed  to  us  by  the  framers  of  the 
Constitution. 

But  we  must  not  rely  too  much  upon  what  was  done 
for  us  one  hundred  and  fifty  years  ago.  Nor  must  we 
place  our  dependence  upon  the  boundless  natural  re- 
sources of  the  country.  We  must  do  some  hard  think- 
ing, and  after  we  have  done  that  we  must  have  the 
courage  to  say  what  we  think,  whether  it  is  popular  or 
not.  In  the  face  of  the  impatient  clamors  of  ultra- 
radical, impetuous  world-improvers  we  must  dare  main- 
tain that  many  of  the  things  that  are,  are  right,  being 
given  that  this  is  not  Utopia,  but  a  world  of  very 
definite  limitations  not  of  our  making  or  choosing. 

The  fact  that  the  tremendous  event  of  the  war  will 
not  leave  the  world  as  it  found  it,  does  not  mean  that 
the  world  has  been  following  the  wrong  track  for  a 
thousand  years  and  that,  to  some  of  us,  all  of  a  sudden, 
has  been  vouchsafed  the  omniscience  and  the  vision  to 
make  it  over  from  the  ground  up.  It  is  just  because 
we  are  about  to  enter  a  period  of  searching  and  testing 
for  the  right,  a  period  during  which  the  glittering  and 
plausible  new  will  impetuously  clamor  for  the  place  of 
the  well-worn  old,  a  period  big  with  portents  for  the 
world's  weal  or  woe — that  it  behooves  us  all  to  think 
and  speak  sanely  and  soberly  and  not  yield  to  the  temp- 
tation of  floating  with  surface  currents  or  to  attune  our 
utterances  to  shallow  smatterings  which  give  all  too 
facile  access  to  the  reputation  of  being  forward-looking, 
enlightened  and  warm  hearted. 

But  we  must  also  realize  that  some  of  the  things 
that  are,  are  no  longer  fitted  for  the  present  day  and 


THE     TASK     AHEAD  28 1 

must  be  changed.  We  must  carefully  think  what  ought 
to  be  preserved,  what  ought  to  be  changed,  and  how. 

Heretofore  in  this  country,  our  path  was  a  relatively 
easy  one  to  travel.  Since  the  Civil  War  we  have  not 
had  any  really  difficult  problem  to  tackle.  All  we  had 
to  do  was  to  attend,  with  due  diligence,  energy  and 
enterprise,  to  our  own  affairs,  each  one  of  us,  and  na- 
ture, our  Constitution,  the  inherited  things  which  were 
ours,  did  the  rest.  Now,  we  have  got  to  give  some  seri- 
ous thought  to  matters  of  general  import.  The  war 
has  brought  us  face  to  face  with  new  situations  and 
new  problems.  We  must  not  put  our  heads  in  the  sand, 
we  must  not  shirk  them,  neither  must  we  be  afraid  of 
them.  And  I  think  the  most  urgent,  the  most  important 
and  indeed  the  most  profitable  business  which  we  can 
do  at  this  juncture,  is  to  help  bring  about  the  right 
solution  of  those  problems  which  are  pressing  for  solu- 
tion, because  on  the  right  solution  of  them  the  welfare 
of  every  one  of  us,  high  or  low,  depends. 

The  American  people,  the  vast  majority  of  them, 
want  what  is  right  and  fair  and  just.  We  must  sit 
down  together  and  find  out  what  is  right  and  fair  and 
just  and  making  for  the  welfare  of  all  of  us.  If  we  do 
that,  we  will  not  fail.  The  number  of  those  who  de- 
liberately want  to  do  a  wrongful  thing  is  very  small 
indeed.  The  number  of  those  who  deliberately  say  and 
feel:  "Evil,  be  thou  my  God,"  is  almost  negligible. 
The  vast  majority  not  only  want  to  do  what  is  right, 
but  are  amply  able  to  judge  what  is  right,  to  judge 
wisely  and  sanely  and  justly,  provided  the  pros  and 
cons  of  a  proposition  are  fully  put  before  them.    Now, 


282  BUSINESS     AND     ECONOMICS 

that,  I  think,  is  the  thing  that  we  must  all  do,  each 
within  his  circle  and  within  the  widest  possible  circles 
that  he  can  reach, — reason  together,  try  to  find  out  what 
is  wrong,  try  to  find  out  how  it  can  be  righted,  in  good 
nature,  in  good  feeling,  with  as  much  intelligence, 
breadth  of  vision,  sympathetic  understanding  and  dis- 
interestedness as  we  can  command. 

Coming  from  general  considerations  to  concrete  ques- 
tions, time  does  not  permit  me  to  do  more  than  men- 
tion and  to  discuss  cursorily  a  few  of  them. 

Let  me  take  a  moment  to  warn  you  that  I  am  not 
an  orator — I  am  a  business  man ;  but  I  do  believe  that 
we  business  men  have  a  duty  to  come  out  once  in  a 
while  and  stand  up  in  the  public  forum  and  say  what 
we  have  to  say,  whether  it  be  well  or  badly  expressed, 
so  long  as  we  say  it  sincerely.  The  people  will  not 
ask  from  us  great  speeches — they  are  getting  less  and 
less  interested  in,  or  impressed  by,  oratorical  display — 
but  they  will  ask  from  us  the  truth,  as  we  see  it,  the 
reasons  we  have  for  our  beliefs,  and  the  experience  we 
can  contribute  to  the  problems  of  the  day. 

Now,  to  come  to  the  discussion  of  some  of  our  prob- 
lems. 

GOVERNMENTAL    ADMINISTRATION 

It  is  a  pity  that  the  Government  did  not  see  its  way, 
during  the  war,  to  appoint  a  commission  to  deal  with 
the  various  questions  that  necessarily  would  come  be- 
fore us  with  the  return  of  peace.  Every  one  of  us  who 
was  not  qualified  to  be  among  the  fighting  forces  was 
willing  and  anxious  to  serve  in  any  capacity  for  which 


THE      TASK     AHEAD  283 

the  Government  wanted  us.  If  called  upon,  we  would 
gladly  have  given  our  best  thought  and  best  strength  in 
the  effort  to  help  to  study,  work  out  and  prepare 
things,  so  that  by  the  time  peace  came  around  a  great 
body  of  preparatory  work  would  have  been  done  and 
a  detailed  and  definite  plan  of  action  ready.  And 
the  inspiration  of  the  war  would  have  served  to  make 
these  conclusions  free  from  the  promptings  of  self-in- 
terest or  class  advantage.  However,  it  was  not  done, 
and  we  have  got  to  take  the  situation  as  we  find  it.  But 
the  fact  that  it  was  not  done  indicates  one  of  our  prob- 
lems. 

In  what  I  am  going  to  say  I  am  not  referring  to  our 
present  Government  (it  would  be  eminently  improper 
if  I  injected  any  political  note  in  this  meeting),  I  am 
referring  to  all  governments  in  free  countries.  The 
problem  which  I  would  indicate  is  that  all  such  govern- 
ments— as,  indeed,  the  people  also — have  the  tendency 
to  overestimate  the  virtues  and  effects  of  legislation 
and  greatly  to  underestimate  what  I  believe  to  be  well- 
nigh  the  most  important  thing  in  government,  namely, 
administration.  We  have  an  enormous  estate  to  ad- 
minister, and  while  wise  legislation  is  of  course  essen- 
tial, equally  essential  is  it  to  administer  that  estate  with 
a  degree  of  care,  economy,  forethought  and  effectiveness 
measurably  approaching  at  least  that  with  which  a  man 
would  administer  his  private  estate. 

The  fact  of  the  importance  of  administration  as  com- 
pared to  other  functions  of  government  was  brought 
home  to  me  forcibly — to  quote  only  one  instance — dur- 
ing my  recent  stay  in  England.     There  they  appointed 


284  BUSINESS     AND     ECONOMICS 

a  Committee  of  Salvage.  Salvage  means  taking  things 
which  were  heretofore  largely  thrown  into  the  scrap- 
heap  and  using  them,  remaking  them,  and  creating 
values  out  of  things  which  heretofore  were  considered 
more  or  less  valueless.  Mr.  Andrew  Weir  (now  Lord 
Inverforth),  the  Director  General  of  Supplies,  a  most 
able  man,  who  was  in  charge  of  that  particular  depart- 
ment, was  good  enough  to  show  me  through  his  offices 
and  give  me  an  idea  of  his  system  of  operation.  He 
told  me  that  in  a  little  over  two  years  of  his  adminis- 
tration of  this  department  of  salvage,  it  had  saved  to 
the  nation  well-nigh  $500,000,000.  Instead  of  "saved" 
it  would  be  more  correct  to  use  the  word  "created," 
for  it  was  wealth  which,  in  the  main,  simply  would  not 
have  existed  without  the  work  of  that  committee.  Five 
hundred  million  dollars  in  two  years!  Of  course,  that 
was  in  war,  but  to  a  considerable  extent  the  same  meth- 
ods can  be  applied  in  peace.  Now,  if  you  will  bear  in 
mind  that  we  are  a  people  twice  as  numerous  and  more 
than  twice  as  extravagant  as  the  people  of  Great 
Britain,  you  can  imagine  what  could  be  done  in  this 
one  field  by  wise  and  able  administration,  in  the  way 
of  creating  new  wealth  and  making  good  the  ravages 
of  war.  If  we  had  a  Federal  Bureau  of  Salvage  ap- 
plying systematically  and  thoroughly  to  Government 
expenditures  and  activities  the  lessons  learned  during 
the  war  in  respect  of  the  possibilities  of  "salvage"  and 
acting  in  an  informatory  and  advisory  way  to  indus- 
tries and  individuals  (as  the  Department  of  Agricul- 
ture does  in  its  field)  I  believe  that  the  results  would 
be  of  great  magnitude. 


THE      TASK     AHEAD  285 

Ours  is  not  only  an  immense  estate,  but  the  most 
bountifully  endowed,  probably,  of  any  estate  in  the 
world.  Most  of  it  must  be  developed  and  can  only  be 
developed  to  best  advantage  by  private  enterprise. 
Some  of  it  must  be  developed,  can  only  be  developed 
by  the  Government.  There  is  a  vast  field  here  for  ad- 
ministration and  for  results  which  would  be  of  the 
utmost  value  to  the  people,  and  that  field  should  re- 
ceive far  greater  and  far  more  thorough  care  and  atten- 
tion by  those  charged  with  the  responsibility  for  gov- 
ernment than  it  has  received  in  the  past. 

But  quite  apart  from  these  potential  developments, 
efficiency  and  economy  in  the  administration  of  the 
every-day  affairs  of  the  Government  are  of  a  good  deal 
more  direct  effect  upon  the  well-being  of  the  people 
than  the  great  majority  of  legislative  enactments.  And 
especially  in  view  of  the  ever-increasing  sphere  of  gov- 
ernmental activity,  it  has  become  a  question  of  genuine 
and  immediate  concern  that  an  adequate  standard  and 
up-to-day  methods  of  administration  and  governmental 
housekeeping  shall  be  insisted  on  and  secured. 

Administration,  of  course,  includes  appointments, 
i.  e.,  the  instruments  of  administration.  I  am  not  suf- 
ficient of  an  idealist  to  believe  that  it  is  possible  in  the 
future  to  make  appointments  irrespective  of  party  con- 
siderations and  to  select  the  best  man  obtainable  for 
every  position,  regardless  of  whether  he  is  a  Democrat 
or  a  Republican,  or  even  a  Non-Partisan  Leaguer,  or 
whatever  it  may  be.  That  would  be  an  idle  dream. 
You  must  make  allowance  for  human  nature,  and  con- 
cede that  a  considerable  number  of  appointments  under 


286 


BUSINESS     AND     ECONOMICS 


our  system  of  government  will  go  to  the  workers  of 
the  party  in  power  and  to  their  friends.  But,  surely, 
appointments  of  essential  importance,  especially  where 
those  appointments  touch  the  very  delicate  and  complex 
machinery  of  business,  should  be  primarily  influenced 
by  the  question:  "Is  the  man  selected  the  most  com- 
petent man  available  for  the  task — at  least  the  most 
competent  man  available  within  the  party1?"  I  think 
the  public  should  insist  more  than  heretofore  that  that 
function  of  administration  which  consists  in  selecting 
men  for  these  difficult,  weighty  and  big  tasks,  the  tasks, 
for  instance,  which  are  entrusted  to  the  various  com- 
missions that  have  more  and  more  come  to  be  a  feature 
of  our  governmental  methods,  must  be  exercised  with 
greater  regard  for  the  qualifications  which  these  posi- 
tions require.  I  think  public  opinion  should  be  stimu- 
lated to  a  realizing  sense  of  the  fact  that  to  appoint 
men  to  exercise  important  functions  for  which  they  are 
not  qualified,  is  a  serious  dereliction  of  duty  and  a 
wrong  against  the  people. 

Let  me  emphasize  that  I  am  not  now  referring  to 
any  particular  appointments,  but  simply  speaking  in  a 
general  way  and  pointing  out  a  general  weakness  of  our 
governmental  administration  as  it  has  existed  in  this 
country  for  many  years.  It  is  little  short  of  a  fraud 
upon  the  public  to  appoint  to  a  position  of  influence 
and  potency  and  to  pay  out  of  the  people's  money,  a 
man  who  is  not  of  proven  competence  and  fitness  for 
dealing  with  the  functions  which  are  entrusted  to  him. 
The  recognition  of  this  fact,  and  the  insistence  upon  a 
proper  standard  of  at  least  the  more  important  ap- 


THE      TASK     AHEAD  287 

pointments  are  going  to  be  more  and  more  needed  as  the 
functions  of  the  government  bring  it  more  and  more 
in  touch  with  the  business  affairs  of  the  nation  and  with 
problems  of  international  importance. 

It  was  in  view  of  these  considerations  that  the  fram- 
ers  of  our  Constitution,  both  Federal  and  State,  wisely 
provided  that  appointments  must  be  ratified  by  the 
Senate,  and  it  is  greatly  to  be  hoped  that  these  bodies 
in  the  States  and  the  Nation  will  more  and  more  come 
to  exercise  scrupulous  care  in  investigating  and  passing 
upon  the  qualifications  of  men  appointed  to  important 
offices. 

TRADE 

Another  problem  is  that  of  trade,  which  of  course 
embraces  a  great  many  things.  The  principal  legisla- 
tive enactments  which  pertain  to  our  trade  were,  gen- 
erally speaking,  devised  a  number  of  years  ago,  or  at 
least  the  principles  which  underlie  those  laws  are  those 
of  a  number  of  years  ago.  Since  then  the  world  has 
changed  and  we  have  grown  enormously.  We  have 
outgrown  many  of  the  things  with  which  the  laws 
clothed  us  years  ago.  When  we  stretch  ourselves  we 
almost  burst  our  jackets.  We  must  be  given  new 
clothes,  better  fitting  our  present  stature.  During  the 
war,  the  Government,  recognizing  that  business  was 
so  hampered  by  restraining  laws  that  it  could  not  move 
freely,  in  practice  set  aside  these  laws  to  a  large  extent, 
because  it  realized,  and  realized  wisely,  that  in  that 
emergency  business  simply  had  to  move  freely,  and 
that  maximum  production  and  the  most  efficient  pro- 


288  BUSINESS     AND     ECONOMICS 

duction  could  not  be  obtained  under  the  operation  of 
some  of  these  laws.  And  such  production  was  abso- 
lutely needed  under  the  pressure  of  war. 

But  it  is  likewise  necessary  in  peace.  It  is  only 
production,  maximum  production,  efficiency  in  produc- 
tion, and  production  on  an  economical  basis,  which  will 
enable  us  to  make  good  the  ravages  of  war,  to  go  ahead 
with  full  speed,  to  compete  in  the  markets  of  the  world, 
to  pay  high  wages,  and  to  meet  the  problem  of  the  high 
cost  of  living. 

The  object  of  most  of  the  laws  to  which  I  refer 
is  entirely  right.  The  object  of  the  Sherman  Law  is 
entirely  right.  But  they  must  be  modernized,  they 
must  be  brought  into  conformity  with  the  needs  and 
the  developments  of  the  day.  They  were  made,  many 
of  them,  to  meet  conditions  which  no  longer  exist  in 
this  country  and  which  I  don't  believe  will  exist  again. 
Some  of  them  were  enacted  in  anger,  some  are  punitive 
in  character,  some  were  passed  for  political  effect  more 
or  less.  A  general  revision  is  needed  of  the  policies 
and  methods  of  our  legislation  appertaining  to  busi- 
ness. 

We  business  men  realize  that  the  path  must  lead 
onward  and  upward.  We  have  more  and  more  come 
to  recognize  within  the  past  dozen  years  that  some 
practices  formerly  sanctioned  by  long  usage  are  no 
longer  in  accord  with  the  conceptions  of  the  times, 
socially,  economically  and  ethically.  More  and  more 
we  have  tried,  steadily  and  progressively,  to  translate 
this  recognition  into  action.  We  willingly  concede  rea- 
sonable, fair  and  constructive  governmental  supervi- 


THE      TASK     AHEAD  289 

sion.  We  do  not  want  governmental  coddling.  We  ask 
no  favors  from  the  Government.  But  neither  do  we 
want  nor  need  to  be  kept  in  leading  strings  or  to  have  a 
policeman  at  our  elbow. 

In  conjunction  with  our  general  trade  let  me  touch 
upon  the  very  important  problem  of  export  trade.  If 
we  are  to  keep  active  the  vastly  increased  capacity  for 
production  which  we  have  created,  we  must  have  an 
outlet  for  our  surplus  products,  for  that  part  of  our 
products  which  can  not  be  absorbed  at  home.  That  is 
needed  at  least  as  much  for  the  benefit  of  our  farmers 
and  workingmen  as  for  the  benefit  of  business.  Ex- 
port trade  is  usually  a  difficult  branch  of  trade,  and  it 
is  going  to  be  doubly  difficult  now  because  the  European 
nations  very  naturally  will  strain  every  nerve  to  gain 
export  trade  themselves,  and  because  while  Europe  will 
need  some  of  our  goods  more  urgently  than  ever  before, 
Europe  has  got  nothing  to  pay  us  with  and  will  not 
have  anything  to  pay  with  for  a  long  time  to  come 
except  goods  of  its  own  and  loans,  and  such  investment 
opportunities  as  it  can  offer  to  American  capital.  It  is 
absolutely  necessary  that  we  find  means  to  enable 
Europe  to  trade  with  us.  That  is  not  only  necessary 
from  the  utilitarian  point  of  view,  but  it  is  our  plain 
duty,  from  the  humane  point  of  view,  to  lend  Europe  a 
hand,  and  it  is  manifestly  called  for  from  the  point 
of  view  of  aiding  to  establish  order,  restore  normal 
processes  of  activity  and  avoid  dangerous  stress,  strain 
and  turmoil  throughout  the  world.  We  have  got  to 
give  these  peoples  the  means  to  buy  from  us.  That 
means  that  we  have  got  to  establish  a  credit  machinery, 


2QO  BUSINESS     AND     ECONOMICS 

that  we  have  got  to  find  ways  to  extend  credit  facilities 
to  Europe,  vastly  beyond  the  scope  now  provided  for. 
That  also  holds  good,  though  to  a  lesser  degree,  in  re- 
spect of  a  number  of  the  nations  in  South  and  Cen- 
tral America,  and  elsewhere. 

The  merchants  of  all  these  nations  are  used  to  deal- 
ing on  a  credit  basis,  and  long  credits  at  that.  Ger- 
many used  to  give  credits  of  almost  unlimited  duration, 
and  if  we  want  to  have  our  share  of  trade  in  the  mar- 
kets of  the  world,  as  we  must,  we  have  got  to  see  to  it 
that  adequate  loans  or  credits  are  afforded  our  foreign 
customers  without  throwing  the  burden  and  the  risk 
entirely  upon  the  individual  business  man  or  the  indi- 
vidual bank,  at  least  during  the  transition  period  from 
a  war  to  a  peace  basis. 

It  is  a  very  urgent  problem,  and  while  its  solution  is 
mainly  "up  to"  private  initiative  and  enterprise,  it  does 
call  for  Government  co-operation  to  the  extent,  at 
least,  of  moral  administrative  support  and  appropriate 
legislation.  It  ought  to  have  been  prepared  for  during 
the  war.  It  must  now  be  tackled  without  delay,  or 
great  harm  is  apt  to  ensue.  The  fall  in  the  rates  of  for- 
eign exchanges  is  ominous.  Export  trade  once  lost  is 
exceedingly  difficult  to  recover. 

Another  question  which  enters  largely  into  our  ex- 
port trade  is  our  shipping  policy.  It  is  a  vital  thing 
that  a  far  larger  portion  of  our  trade  than  heretofore 
be  carried  in  our  own  bottoms,  that  we  establish  ship- 
ping lines,  that  we  do  not  depend  upon  the  good-will 
and  the  consideration  and  convenience  of  other  nations. 
The  Chairman  of  the  Shipping  Board,  Mr.  Hurley,  the 


THE      TASK     AHEAD  20)1 

other  day  put  forward  an  important  and  interesting 
program  for  dealing  with  that  question.  I  am  frank  to 
say  that  I  have  not  sufficiently  digested  it — -it  is  a  large 
and  far-reaching  plan — to  express  an  opinion  about  it, 
except  to  say  that  in  at  least  one  main  feature  it  fol- 
lows lines  of  which  the  business  community  will  cor- 
dially approve.  I  refer  to  the  return  of  shipping  to 
private  operation  and  the  withdrawal  of  Government 
from  that  field  of  commerce. 

THE    RAILROADS 

And  that  brings  me  to  the  matter  of  the  nation's 
policy  and  laws  in  respect  of  the  railroads,  which  in- 
cludes the  question  of  government  ownership  and  opera- 
tion of  the  railroads.  Somehow  or  other,  there  seems 
to  be  a  special  Providence  which  watches  over  this 
country.  It  lets  it  make  mistakes,  because  mistakes 
reasonable  in  quantity  and  quality  are  salutary  for  a 
country  as  they  are  for  an  individual,  but  keeps  it  from 
making  vital,  fundamental  mistakes.  One  of  the  evi- 
dences of  that  Providential  favor  I  see  in  the  fact  that 
we  have  had  a  taste  of  government  operation  of  rail- 
roads before  having  so  deeply  and  definitely  committed 
ourselves  to  it  as  to  make  it  very  difficult  to  retrace 
our  steps.  Three  years  ago,  I  believe,  the  majority 
opinion  among  railroad  men  was  an  almost  fatalistic 
belief  that  government  operation  of  railroads  was 
bound  to  come,  because  the  people,  taking  at  their  face 
value  the  promises  and  prophecies  of  those  who  advo- 
cated it,  would  insist  on  having  it.  It  might  be  delayed 
but  it  could  not  be  prevented. 


292  BUSINESS     AND     ECONOMICS 

Well,  the  people  have  seen  the  thing  in  operation; 
I  don't  think  they  want  it  any  more.  I  believe  they 
have  recognized  that  when  the  Government  undertakes 
business,  the  result  usually  is  that  it  does  indeed  be- 
come an  "undertaker."  The  American  people  have  the 
capacity  of  learning  with  extraordinary  quickness,  and 
when  they  see  a  thing  concretely  before  them,  they 
know  what  is  what.  You  can  not  fool  them  by  a  name, 
except  when  and  as  long  as  they  don't  quite  realize 
what  that  name  means.  But  when  they  have  seen 
before  their  eyes  the  thing  which  that  name  signifies 
and  have  had  experience  of  its  working,  it  does  not  take 
them  very  long  to  determine  whether  they  want  to  keep 
it  or  discard  it,  however  potent  the  spell  of  the  name 
used  to  be,  looked  at  from  a  distance.  Now,  I  am  quite 
certain  that  the  majority  of  the  people  have  realized 
from  what  they  have  seen  in  the  past  eighteen  months 
that  government  operation  of  railroads  can  not  give 
them  the  facilities,  the  eagerness  of  service,  the  cheap 
rates  and  the  progress  which  private  initiative  and 
enterprise  and  competition  have  heretofore  given  them 
and  stand  ready  to  give  again. 

We  have  observed  the  same  thing  very  conspicuously 
in  the  assumption  by  the  Government  of  the  operation 
of  telephones  which  was  admittedly  conducted  admir- 
ably under  private  management.  The  Government  has 
retained  the  same  managers  as  formerly,  the  same  heads 
of  departments,  the  same  bright  and  eager  telephone 
girls.  Pretty  much  the  same  individuals  are  at  work 
now  as  formerly.  It  must  be  admitted,  in  fairness, 
that  the  exigencies  of  the  war  have  affected,  to  a  certain 


THE      TASK     AHEAD  293 

extent,  the  personnel  and  the  plant,  but  apart  from 
that,  nothing  has  changed  except  that  the  blight  of 
government  control  has  fallen  upon  the  service — and 
that  has  meant  increase  in  cost  and,  as  we  all  know- 
to  our  exasperation,  very  distinct  deterioration  in  ser- 
vice.   There  you  have  the  fact  as  against  the  theory. 

The  business  functions  of  government  should  be  con- 
fined, in  a  free  country,  to  doing  those  things  which 
private  enterprise  either  can  not  do  equally  well,  or 
which,  for  reasons  of  public  policy,  private  enterprise 
ought  not  to  be  allowed  to  do.  It  is  not  compatible 
with  the  spirit  of  our  system  and  methods  of  govern- 
ment that  the  Government  should  run  the  railroads. 
It  is  not  in  the  interest  of  the  country  that  it  should 
do  so.  It  is  unable  to  do  so  anywhere  near  as  efficiently 
and  economically  as  private  enterprise.  And — I  say  it 
without  meaning  to  throw  blame  upon  any  one,  and  not 
for  the  purpose  of  criticizing — it  is  not  compatible 
with  our  system  of  government,  indeed  it  is  not  com- 
patible with  liberty,  that  any  one  man,  however  wise 
and  however  right-thinking,  or  any  executive  depart- 
ment, should  have  the  power  to  say  to  three  million  of 
workmen,  "I  will  increase  your  wages  $800,000,000  a 
year,  or  $400,000,000,  or  $200,000,000,  or  not  at  all." 
That  is  a  power  which  no  one  individual  or  depart- 
ment ought  to  be  permitted  to  exercise  or  can  safely 
exercise  in  a  republic  where  every  man's  vote  is  assumed 
to  be  free  and  uninfluenced. 

Fortunately,  all  indications  seem  to  show  that  the 
solution  of  the  railroad  problem  is  going  to  be  ap- 
proached with  calmness  and  good  feeling  and  in  the 


294  BUSINESS      AND      ECONOMICS 

light  of  the  lessons   which  the  country  has   learned 
during  the  period  of  government  operation. 

We  do  want  to  have  the  railroads  run  for  the  benefit 
of  all  the  people,  and  not  for  the  benefit  either  of 
Wall  Street  or  of  any  favored  concern,  or  even  of  the 
Railroad  Administration  or  any  other  governmental 
department.  We  do  want  laws  which  will  enable  the 
Government  to  exercise  supervision  and  regulation, 
strong  and  comprehensive,  but  fair  and  constructive, 
not  punitive  or  strangling.  We  do  want  those  features 
of  operation  which,  under  government  operation,  have 
proved  advantageous  and  convenient  to  the  public,  to 
be  preserved,  at  the  same  time  that  those  features  of 
legislation  and  administration  which  experience  has 
shown  to  be  unduly  and  unwisely  hampering,  are 
abolished.  And  after  such  legislation  shall  have  been 
devised  and  passed  as  will  carefully  and  effectively 
safeguard  the  public  interest  and  be  fair  and  reasonable 
all  round,  the  great  majority  of  us,  I  am  convinced, 
want  the  railroads  turned  back  to  private  operation 
and  set  free  as  a  field  for  private  initiative  and  enter- 
prise, and,  above  all,  as  a  field  for  men  of  ability, 
force  and  vision. 

TAXATION 

Another  important  question,  far-reaching  in  its  ef- 
fects, is  that  of  taxation.  There,  again,  we  must  not 
act  in  deference  to  a  theoretical  conception  which, 
when  translated  into  fact,  becomes  harmful  to  all.  Of 
course,  we  all  agree  that  taxation  must  be  so  laid  that 
those  who  benefit  most  and  can  best  afford  it,  must 


THE      TASK     AHEAD  295 

pay  the  most;  and  those  who  can  less  afford  it,  must 
pay  less;  and  those  who  can  not  pay  at  all,  must  be 
exempt  at  least  from  direct  imposts.  But  we  must 
not  "kill  the  goose  that  lays  the  golden  eggs,"  and, 
after  all,  it  is  business  largely  that  produces  those  eggs. 
We  must  not  so  dump  the  load  upon  the  back  of  busi- 
ness that  it  will  tend  to  cripple  incentive,  effort,  enter- 
prise, commercial  and  financial  venturing,  and  to  pre- 
vent accumulation  necessary  for  the  upkeep  and  expan- 
sion of  our  commercial  activities. 

After  but  one  and  one-half  years  of  war,  we  have 
burdened  business  with  a  load  such  as  it  has  to  bear 
in  no  other  country  after  more  than  four  years  of  war. 
It  stands  to  reason  that  business  can  not  pay  both  the 
highest  taxes  existing  anywhere  and  the  highest  wages 
existing  anywhere,  and  then  expect  to  hold  its  own  in 
the  markets  of  the  world. 

It  was  right  and  wise  for  the  Government  to  insist 
that  as  large  a  part  as  possible  of  our  war  expenditures 
must  be  provided  by  taxation,  and  I  am  sure  the  coun- 
try will  be  better  for  it  that  so  large  a  part  of  the  cost 
of  the  war  has  been  raised  by  taxation. 

No  right-thinking  man  will  advocate  a  plan  of  taxa- 
tion that  will  spare  wealth.  But  he  will  advocate  a 
system  and  methods  which,  by  taking  account  of  tested 
and  immutable  principles  that  can  not  be  disregarded 
with  impunity,  will  preserve  the  economics  of  the  coun- 
try on  an  even  keel ;  a  system  and  methods  which,  with- 
out tenderness  for,  yet  without  animus  against,  those 
who  have  been  materially  successful,  will  adjust  the 
financial  burden  of  government  fairly  and  wisely,  with 


296  BUSINESS     AND     ECONOMICS 

full   regard  to  national  welfare  and  the  dictates  of 
social  justice,  free  from  fear  or  favor. 

I  believe  it  is  not  too  much  to  say  that  our  existing 
taxation  measures  in  various  important  respects  fly  in 
the  face  of  economic  science,  of  common  sense  and  of 
equity.  They  are  cumbersome,  vexatious  and  almost 
incredibly  complex.  They  bear  the  imprint  of  class 
and  sectional  discrimination.  They  penalize  thrift  and 
industry,  and  leave  the  wastrel  and  shirker  untouched. 
They  discourage,  disturb  and  impede  business  and  place 
the  American  business  man  at  a  disadvantage  as  against 
his  European  competitor.  At  a  time  when  America  is 
aiming  to  become  a  world  centre,  they  deter  foreign 
capital  from  coming  here.  They  tend  to  curtail  pro- 
duction. They  are  a  strong  contributing  factor  in 
bringing  about  the  prevailing  high  level  of  prices — a 
grave  and  serious  evil  which  can  and  must  be  miti- 
gated, a  grievous  burden  particularly  upon  those  men 
and  women  who  live  on  moderate  salaries  and  who 
are  all  the  more  entitled  to  sympathy  and  redress  as 
they  have  borne  their  troubles  with  great  patience,  and 
a  noteworthy  absence  of  importunate  agitation. 

ART 

Then  there  is  the  problem — at  least,  I  consider  it 
a  problem — of  what  we  can  do  in  this  country  to  make 
Art  more  of  a  factor  in  the  lives  of  the  masses  of  the 
people.  Now,  I  am  not  a  "high-brow"  (though  I  ad- 
mit I  used  to  be  one),  but  in  New  York  and  else- 
where I  have  sought  and  found  opportunity  to  talk 
with  many  men  and  women  in  all  walks  of  life  on  this 


THE     TASK     AHEAD  297 

subject  of  art  and  have  become  thoroughly  convinced 
how  great  and  beneficent  an  influence  art  can,  and 
should,  be  made  in  the  lives  of  the  people.  It  is  a  sig- 
nificant thing  that  the  labor  unions  of  New  York  have 
inaugurated  a  movement  for  the  creation  of  a  People's 
Theatre.  Great  portions  of  our  population  are  hungry 
for  art;  they  are  eager  for  outlets  for  their  emotion; 
they  are  groping  for  something  which  shall  respond 
to  their  spiritual  aspirations,  something  quite  beyond 
material  satisfaction. 

Generally  speaking,  we  have  not  yet  realized  ade- 
quately how  serious  and  important  a  cultural  element 
art  is  in  the  life  of  a  community,  how  weighty  its  pur- 
pose, how  great  its  mission.  It  is  one  of  the  most  potent 
factors  for  good,  one  of  the  strongest  agencies  among 
those  having  power  to  form  and  guide  the  thoughts 
and  sentiments  of  the  people.  It  is  educational,  it  is 
•timulating,  it  is  nourishing,  it  is  healing. 

I  wish  our  men  of  wealth,  whose  generosity  in  the 
support  of  educational,  scientific  and  religious  institu- 
tions has  become  proverbial,  would  turn  the  stream  of 
their  benefactions  into  the  channels  of  art  more  abun- 
dantly than  has  been  their  wont  hitherto.  I  wish  we 
would  create  a  Federal  Department  of  Fine  Arts,  such 
as  exists  in  many  European  countries,  and  place  at  its 
head  a  man  of  understanding,  vision,  enthusiasm,  sym- 
pathy and  outstanding  capacity. 

I  am  convinced  that  if  we  go  about  it  with  a  degree 
of  seriousness,  energy  and  intensity  merely  even  ap- 
proaching that  which  we  bring  to  bear  upon  our  indus- 
trial pursuits,  it  is  open  to  America  to  accomplish  great 


298  BUSINESS     AND     ECONOMICS 

things  in  art;  no  less  great  than  what  the  genius  of 
our  people  has  achieved  in  other  fields. 

CAPITAL   AND    LABOR 

I  have  reserved  to  the  last  a  discussion  of  that  one 
of  our  problems  which  is,  probably,  the  most  impor- 
tant and  immediately  pressing — namely,  the  problem  of 
the  relations  between  Capital  and  Labor. 

The  principle  on  which  all  concerned  should  deal 
with  the  labor  question  appears  to  me  plain.  It  is  the 
principle  of  the  Golden  Rule.  I  think  the  formula 
should  be  that,  first,  labor  is  entitled  to  a  living  wage; 
after  that,  capital  is  entitled  to  a  living  wage;  what  is 
left  over  belongs  to  both  capital  and  labor,  in  such  pro- 
portion as  fairness  and  equity  and  reason  shall  deter- 
mine in  all  cases.* 

The  application  of  that  formula  is,  of  course,  com- 
plex and  difficult,  because  there  are  so  many  different 
kinds  of  labor,  there  are  so  many  different  kinds  of 
capital.  Not  infrequently  the  laborer  and  capitalist 
overlap  and  merge  into  one.  You  have  skilled  labor 
and  unskilled  labor  and  casual  labor,  you  have  the 
small  employer,  the  large  individual  employer,  the 
corporate  employer,  the  farmer,  the  inventor,  the  pros- 
pector, etc.  And  then,  circumstances  and  conditions 
vary  greatly,  of  course,  in  different  parts  of  the  country 
and  in  different  industries. 

It  is  impossible  to  measure  by  the  same  yard-stick 
everywhere,  but  the  principle  of  fairness  can  be  stated, 


*  That  does  not  necessarily  mean  "profit  sharing"   as  the  term   i9 
generally  understood. 


THE     TASK     AHEAD  299 

the  desire  can  be  stated  to  do  everything  possible  to 
bring  about  good  feeling  and  good  understanding  be- 
tween labor  and  capital,  and  willingly  and  freely  to 
co-operate  so  that  labor  shall  receive  its  fair  share  in 
the  fruits  of  industry,  not  only  by  way  of  a  wage  re- 
turn, but  of  an  adequate  return  also  in  those  less  tan- 
gible things  which  make  for  contentment  and  happi- 
ness. 

It  seems  to  me  that,  in  the  main,  right-thinking 
men  of  capital  and  labor  would  concur  in  the  following 
points : 

l.  The  workman  is  neither  a  machine  nor  a  com- 
modity. He  is  a  collaborator  with  capital.  (I  do  not 
use  the  word  "partner,"  because  partnership  implies 
sharing  in  the  risks  and  losses  of  the  business,  which 
risks  and  losses  labor  does  not  and  can  not  be  expected 
to  share,  except  to  a  limited  extent  and  indirectly). 
He  must  be  given  an  effective  voice  in  determining 
jointly  with  the  employer  the  conditions  under  which 
he  works,  either  through  committees  in  each  factory  or 
other  unit,  or  through  labor  unions,  or  through  both. 
Individual  capacity,  industry  and  ambition  must  re- 
ceive encouragement  and  recognition.  The  employer's 
attitude  should  not  be  one  of  patronizing  or  grudging 
concession,  but  frank  and  willing  recognition  of  the  dig- 
nity of  the  status  of  the  worker  and  of  the  considera- 
tion due  to  him  in  his  feelings  and  viewpoints.  Nor 
must  the  employer  look  for  "gratitude"  and  be  disap- 
pointed, discouraged,  or  resentful  if  he  does  not  find  it. 
No  man  is  entitled  to  ask  gratitude  for  doing  that  which 
is  right.    The  just  and  enlightened  employer  may  ex- 


300  BUSINESS     AND     ECONOMICS 

pect  good  will,  esteem,  and  a  fair  day's  hard  work  for 
a  fair  wage,  but  the  relation  between  employer  and 
employee  is  false  and  untenable  if  it  is  sought  on  the 
part  of  the  employer  to  base  it  on  the  conception  of 
himself  in  the  role  of  the  generous  dispenser  and  the 
workman  in  the  role  of  the  duly  obliged  recipient. 

Everything  practicable  must  be  done  to  infuse  in- 
terest and  conscious  purpose  into  the  work  of  the  em- 
ployee and  to  diminish  the  sense  of  drudgery  and 
monotony  of  his  daily  task.  The  closest  possible  con- 
tact must  be  maintained  between  employer  and  em- 
ployee. Arrangements  for  the  adjustment  of  griev- 
ances must  be  provided  which  will  work  smoothly  and 
instantaneously.  Every  feasible  opportunity  must  be 
given  to  the  workman  to  be  informed  as  to  the  business 
of  which  he  forms  a  part.  He  must  not  be  deprived 
of  his  employment  without  valid  cause.  For  his  own 
satisfaction  and  the  good  of  the  country,  every  induce- 
ment and  facility  should  be  extended  to  him  to  become 
the  owner  of  property. 

Responsibility  has  nearly  always  a  sobering  and 
usually  a  broadening  effect.  I  believe  it  to  be  in  the 
interest  of  labor  and  capital  and  the  public  at  large 
that  workmen  should  participate  in  industrial  respon- 
sibilities to  the  greatest  extent  compatible  with  the 
maintenance  of  needful  order  and  system  and  the  in- 
dispensable unity  of  management.  Therefore,  wher- 
ever it  is  practicable  and  really  desired  by  the  em- 
ployees themselves  to  have  representation  on  the  Board 
of  Directors,  I  think  that  should  be  conceded.  It  would 
give  them  a  better  notion  of  the  problems,  complexities 


THETASKAHEAD  301 

and  cares  which  the  employer  has  to  face.  It  would 
tend  to  allay  the  suspicions  and  to  remove  the  miscon- 
ceptions which  so  frequently  are  the  primary  cause  of 
trouble.  The  workman  would  come  to  realize  the 
problems,  cares  and  worries  of  the  employer  and  the 
strain,  the  vicissitudes  and  risks  which  the  management 
of  business  involves.  He  would  find  himself  face  to 
face  with  the  workings  of  practical  economics  and 
would  discover  them  to  be  very  different  from  the 
theories  which  agitators  have  dinned  into  his  ears.  He 
would  come  to  see  that  capitalists  are  not,  perhaps,  al- 
ways quite  as  astute  and  deep  as  they  are  given  credit 
for,  but,  on  the  other  hand,  a  good  deal  less  grasping 
and  selfish  than  they  are  frequently  believed  to  be,  a 
good  deal  more  decent  and  well  meaning,  and  made  of 
the  same  human  stuff  as  the  worker,  without  the  addi- 
tion of  either  horns  or  claws  or  hoofs. 

2.  The  worker's  living  conditions  must  be  made 
dignified  and  attractive  to  himself  and  his  family. 
Nothing  is  of  greater  importance.  To  provide  proper 
homes  for  the  workers  is  one  of  the  most  urgent  and 
elementary  duties  of  the  large  employer.  To  the  ex- 
tent that  the  employer  is  unable  to  provide  such  homes 
— and,  of  course,  the  smaller  employer  has  not  the 
means  to  do  so — it  becomes  the  duty  of  the  State  or  the 
community. 

3.  The  worker  must  be  relieved  of  the  dread  of  sick- 
ness, unemployment  and  old  age.  It  is  utterly  inad- 
missible that  because  industry  slackens,  or  illness  or 
old  age  befalls  a  worker,  he  and  his  family  should  there- 
fore be  condemned  to  suffering  or  to  the  dread  of 


302  BUSINESS      AND     ECONOMICS 

suffering.  The  community  must  find  ways  and  means 
of  seeing  to  it,  by  public  works  or  otherwise,  that  any 
man  fit  and  honestly  desirous  to  do  an  honest  day's 
work  shall  have  an  opportunity  to  earn  a  living.  Those 
unable  to  work  must  be  honorably  protected.  The  only 
ones  on  which  a  civilized  community  has  the  right  to 
turn  its  back  are  those  unwilling  to  work. 

Some  of  you  may  regard  certain  of  the  foregoing 
suggestions  as  closely  approaching  Socialism.  I  be- 
lieve, on  the  contrary,  that  measures  of  the  kind  and 
spirit  I  advocate,  so  far  from  being  in  accord  with  the 
real  Socialist  creed  and  aim,  would  be  in  the  nature 
of  effective  antidotes  against  Socialism  and  kindred 
plausible  fallacies. 

4.  The  worker  must  receive  a  wage  which  not  only 
permits  him  to  keep  body  and  soul  together,  but  to  take 
proper  care  of  his  wife  and  children,  to  have  for  him- 
self and  them  a  share  of  the  comforts,  interests  and 
recreations  of  life,  to  lay  something  by,  and  to  be 
encouraged  in  the  practice  and  obtain  the  rewards  of 
thrift. 

5.  Labor,  on  the  other  hand,  must  realize  that  high 
wages  can  only  be  maintained  if  high  production  is 
maintained.  The  restriction  of  production  is  a  sinister 
and  harmful  fallacy,  most  of  all  in  its  effect  on  labor. 
Even  the  official  organ  of  the  Bolshevist  Regime  in 
Russia  announced  recently  that  "increased  production 
is  not  only  the  imperative  duty  but  the  imperative  in- 
terest of  the  proletariat." 

The  primary  cause  of  poverty  is  under-production. 
Furthermore,  lessened  production  naturally  makes  for 


THE      TASK     AHEAD  303 

high  costs.  High  wages  accompanied  by  proportion- 
ately high  cost  of  the  essentials  of  living  don't  do  the 
worker  any  good.  And  they  do  the  rest  of  the  com- 
munity a  great  deal  of  harm.  The  welfare  of  the  so- 
called  middle  classes,  i.  e.,  the  men  and  women  living 
on  moderate  incomes,  the  small  shopkeeper,  the  average 
professional  man,  the  farmer,  etc.,  is  just  as  important 
to  the  community  as  the  welfare  of  the  wage-earner. 
If  through  undue  exactions,  through  unfair  use  of  his 
power,  through  inadequate  output,  the  workman  brings 
about  a  condition  in  which  the  pressure  of  high  prices 
becomes  intolerable  to  the  middle  classes,  he  will  create 
a  class  animosity  against  himself  which  is  bound  to 
be  of  infinite  harm  to  his  legitimate  aspirations.  Pre- 
cisely the  same,  of  course,  holds  true  of  capital. 

The  advent  of  the  machine  period  in  industry  some- 
what over  a  century  ago  brought  about  a  fundamental 
and  violent  dislocation  of  the  relationship  which  had 
grown  up  through  hundreds  of  years  between  employer 
and  employee.  The  result  has  been  a  grave  and  long- 
continued  maladjustment.  In  consequence  of  it,  for  a 
long  period  in  the  past,  it  must  be  admitted  labor  did 
not  secure  a  square  deal,  and  society  failed  to  do  any- 
thing like  its  full  duty  by  labor.  But,  more  and  more 
of  recent  years,  the  conscience  and  thought  of  the  world 
have  awakened  to  a  recognition  of  the  rights  of  the 
working  people.  Much  has  been  done  of  late  to  remedy 
that  maladjustment,  the  origin  of  which  dates  back  to 
the  beginning  of  the  nineteenth  century.  The  process 
of  rectification  has  not  yet  been  completed,  but  it  is 
going  on  apace.    Meanwhile,  laboring  men  should  take 


304  BUSINESS     AND     ECONOMICS 

heed  that,  in  their  rightful  resentment  against  former 
practices  of  exploitation  and  in  their  determination  to 
obtain  the  redress  of  just  grievances,  they  do  not  per- 
mit themselves  to  be  misled  by  plausible  fallacies  or 
self-seeking  agitators.  They  must  not  give  credence, 
for  instance,  to  the  absurd  preachment  that  practically 
all  wealth,  other  than  that  produced  by  the  farmer,  is 
the  product  of  the  exertions  of  the  workingman. 

There  are,  of  course,  a  number  of  other  factors  that 
enter  into  the  creation  of  wealth.  Thus,  for  instance, 
the  "directive  faculty,"  the  quality  of  leadership  in 
thought  and  action,  is  not  only  one  absolutely  needful 
in  all  organized  undertakings,  great  or  small,  but  it 
becomes  increasingly  rare  and,  consequently,  increas- 
ingly more  valuable  as  the  object  to  which  it  addresses 
itself  increases  in  size,  complexity  and  difficulty.  Pro- 
duction depends  not  only  upon  willing  hands,  but 
equally,  if  not  more  so,  upon  creative  brains,  capable 
direction,  venturing  capital. 

Let  us  take  as  an  example  the  case  of  Mr.  Henry 
Ford.  Through  the  organizing  genius  and  enterprise 
of  this  absolutely  self-made  man  (not  by  monopoly,  but 
in  keen  competition),  the  automobile,  instead  of  being 
a  luxury  of  the  few,  has  been  brought  within  the  reach 
of  those  of  modest  means. 

The  cost  of  the  product  has  been  vastly  cheapened. 
The  margin  of  profit  on  each  automobile  sold  has  been 
greatly  diminished.  Wages  have  been  very  largely  in- 
creased, the  living  conditions  of  employees  greatly 
improved.  Work  has  been  found  for  a  great  many 
more  men  than  were  employed  before. 


THE     TASK     AHEAD  305 

In  other  words,  every  single  human  factor  concerned 
in  either  production  or  consumption  has  been  advan- 
taged. New  wealth  has  been  created  at  the  expense  of 
no  one.  It  can  not  be  said  that  it  was  created  by  the 
workingman,  except  in  the  physical  sense.  It  was  not 
created  by  either  monopoly  or  privilege.  It  was  created 
mainly  out  of  Mr.  Ford's  brain  and  at  his  risk. 

By  far  the  largest  percentage  of  this  new  wealth 
goes  to  pay  the  wages  of  workingmen  and  other  ex- 
penses of  the  business,  but  out  of  what  is  left,  Mr. 
Ford's  share  is,  by  common  report,  in  excess  of  $1,000,- 
000  a  year. 

Did  Mr.  Ford  earn  $1,000,000  in  one  year"?  If  not, 
how  much  did  he  earn?  By  what  scale  would  you 
measure  the  proportion  due  to  him  of  the  new  wealth 
created  mainly  by  his  faculties'? 

If  he  had  not  been  allowed  to  earn  the  large  sums 
which  he  did  earn,  how  and  where  could  he  have 
found  the  means  to  enlarge  and  improve  his  factory, 
so  as  to  make  possible  an  enterprise  which  immensely 
cheapened  the  product  to  the  consumer  and  largely 
increased  the  wages  to  the  workingman  and  the  oppor- 
tunity for  employment1?  Is  there  any  instance  where 
communistic  or  even  merely  co-operative  undertakings 
have  produced  similar  results?  Is  there  any  instance 
where  governmental  management  has  produced  similar 
results'? 

Or,  to  take  another  instance :  The  State  of  Florida 
existed  long  before  Mr.  Henry  M.  Flagler  came  upon 
the  scene,  but  its  opportunities  were  permitted  by  its 
people  and  government  to  lie  largely  dormant  until 


306       business    and    economics 

Mr.  Flagler  risked  his  fortune  and  employed  the  power 
of  his  creative  genius  to  realize  the  visions  which  he 
conceived  as  to  the  possibilities  of  that  beautiful  and 
richly  endowed  portion  of  our  national  domain.  The 
new  wealth,  growth  and  opportunities  which  were 
created  by  Mr.  Flagler's  daring  and  far-flung  enter- 
prise, undertaken  and  carried  out  by  him  almost  single- 
handed  in  the  face  of  scoffing  and  discouragement  and 
vast  difficulties,  are  almost  incalculable.  A  portion  of 
that  new  wealth — a  considerable  portion  regarded  by 
itself,  but  utterly  insignificant  as  compared  to  the  total 
enrichment  of  individuals  as  well  as  of  communities, 
the  State,  and  the  nation — went  to  Mr.  Flagler.  Did 
he  earn  that  reward?  Can  it  be  denied  that  his  direc- 
tive faculty  and  pioneering  genius  were  a  splendid 
investment  to  the  people  of  Florida  and  of  the  nation, 
at  the  compensation  he  received? 

It  would  be  easy  to  multiply  similar  instances  tes- 
tifying to  the  vast  additions  made  to  the  assets  of  the 
community  by  the  genius,  daring  and  efforts  of  men 
endowed  with  the  gifts  of  industrial  captaincy. 

In  a  recently  published,  very  able  pamphlet  entitled 
"Industrial  Salvation,"  Miss  Christabel  Pankhurst,  the 
well-known  English  leader  in  the  cause  of  woman 
suffrage,  says: 

"Certain  Socialists,  who  ought  to  know  better,  have 
falsely  taught  that  the  poverty  or  semi-poverty  of  the 
many  is  due  to  the  luxurious  living  of  the  prosperous 
sections  of  the  community.  This  is  not  the  truth,  and 
if  through  all  the  years  of  Socialist  preachings  the 
result  of  each  year's  industrial  effort  had  been  divided 


THE      TASK     AHEAD  307 

equally  among  the  members  of  the  community,  there 
would  have  been  no  appreciable  increase  of  prosperity 
for  any,  and  there  would  have  been  one  dead  level  of 
poverty  for  all." 

The  way  to  progress  is  not  to  pull  everybody  down 
to  a  common  level  of  mediocrity,  but  to  stimulate  indi- 
vidual effort,  and  strive  to  raise  the  general  level  of 
well-being  and  opportunity. 

It  is  not  material  success  which  should  be  abolished; 
it  is  poverty  and  justified  discontent  which  should  be 
abolished. 

We  can  not  abolish  poverty  by  division,  but  only  by 
multiplication. 

It  is  not  by  the  spoliation  of  some,  but  by  creating 
larger  assets  and  broader  opportunity  for  all,  that  na- 
tional well-being  can  and  must  be  enhanced. 

I  wonder  how  many  people  realize  that,  if  all  in- 
comes above  $10,000  were  taken  and  distributed  among 
those  earning  less  than  $10,000,  the  result,  as  near  as 
it  is  possible  to  figure  out,  would  be  that  the  income 
of  those  receiving  that  distribution  would  be  increased 
barely  ten  per  cent. 

And  the  result  of  any  such  division  would  be  an 
immense  loss  in  national  productivity  by  turning  a 
powerful  and  fructifying  stream  into  a  mass  of  rivu- 
lets, many  of  which  would  simply  lose  themselves  in 
the  sand. 

I  wonder  how  many  people  know  that  the  frequent 
and  loud  assertion  that  the  great  bulk  of  the  wealth  of 
the  nation  is  held  by  a  small  number  of  rich  men,  is 
wholly  false;  and  that  the  fact  is,  on  the  contrary,  that 


308       business    and    economics 

seven-eighths  of  our  national  income  goes  to  those  with 
incomes  of  $5,000  or  less,  and  but  one-eighth  to  those 
with  incomes  above  $5,000.  Moreover,  those  in  receipt 
of  incomes  of  $5,000  or  less,  pay  little  or  no  income 
tax,  while  those  having  large  incomes  are  subjected  to 
very  heavily  progressive  income  taxes. 

As  bearing  upon  the  mischievous  allegation  so  fre- 
quently and  recklessly  made  by  inciters  to  class  hatred, 
that  capital  appropriates  to  itself  the  lion's  share  of  the 
value  of  the  workers'  product,  certain  figures  recently 
quoted  in  the  New  York  Tribune  are  interesting : 

A  recent  compilation  concerning  some  sixty  of  the 
best  industrial  companies  in  Germany,  over  a  period 
of  ten  years,  ending  April  1,  1918,  showed  that  out  of 
each  $1,000  earned,  $767  went  to  labor,  $117  to  meet 
taxes,  and  $116  to  pay  dividends  to  investors. 

If  the  entire  amount  thus  paid  out  in  dividends  on 
capital  had  been  turned  over  to  the  workmen  instead, 
i.  e.,  if  the  compensation  to  capital  had  been  entirely 
eliminated,  the  result  would  have  been  that  the  aver- 
age rate  of  wages  would  have  been  increased  by  less 
than  three  cents  per  hour,  which  would  have  amounted 
to  a  wage  increase  of  about  $65  per  year  for  each  person 
employed. 

I  have  not  the  data  available  for  a  similar  analysis 
of  the  ratio  of  distribution  of  the  fruits  of  industry 
between  capital  and  labor  in  America,  but  from  such 
cursory  investigation  as  I  have  made,  I  am  satisfied 
that  the  resulting  picture  here  would  not  be  very  dif- 
ferent from  that  which  the  investigation  in  Europe  has 
disclosed. 


THE      TASK     AHEAD  309 

Nor  would  the  result  of  so-called  "socialization  of 
industry"  prove  anything  but  a  snare  and  a  delusion 
to  the  workingmen,  in  other  respects.  To  all  theoretical 
arguments  in  that  line,  Russia  of  today  affords  the 
best  answer.  It  was  Lenine  himself  who  after  but  six 
months  of  experience  in  the  actual  running  of  things 
instead  of  theorizing  on  things,  insisted  that  full  pro- 
duction be  enforced  and  strict  discipline  maintained; 
and  he  advocated  that  piece  work  and  the  Taylor  sys- 
tem of  efficiency  be  introduced,  and  that  the  workers 
be  paijd  according  to  the  output  of  each  individual. 
Indeed,  a  few  months  ago  the  world-improvers  of  the 
Bolshevist  Regime  found  themselves  compelled  to  re- 
sort to  the  antiquated  capitalistic  device  of  locking  out 
recalcitrant  workmen  in  certain  nationalized  factories, 
and  kept  up  that  measure  until  hunger  drove  the  work- 
men to  accept  the  conditions  laid  down  by  their  "ex- 
ploiters," the  State. 

We  have  often  heard  it  said  recently — it  has  become 
rather  the  fashion  to  say  it — that  the  rulership  of  the 
world  henceforth  will  belong  to  labor.  I  yield  to  no 
one  in  my  respect  and  sympathy  for  labor,  or  in  my 
cordial  and  sincere  support  of  its  just  claims.  The 
structure  of  our  institutions  can  not  stand  unless  the 
masses  of  workmen,  farmers,  indeed  all  large  strata  of 
society,  feel  that  under  and  by  these  institutions  they 
are  given  a  square  deal  within  the  limits,  not  of  Utopia, 
but  of  what  is  sane,  right  and  practicable. 

But  the  rulership  of  the  world  will  and  ought  to 
belong  to  no  one  class.  It  will  and  ought  to  belong 
neither  to  labor  nor  to  capital  nor  to  any  other  class. 


3lO  BUSINESS     AND     ECONOMICS 

It  will,  of  right  and  in  fact,  belong  to  those  of  all 
classes  who  acquire  title  to  it  by  talent,  hard  work, 
self-discipline,  character  and  service. 

He  is  no  genuine  friend  or  sound  counselor  of  the 
people  nor  a  true  patriot  who  recklessly,  calculatingly 
or  ignorantly  raises  or  encourages  expectations  which 
can  not  or  which  ought  not  to  be  fulfilled. 

We  must  deal  with  all  these  things  with  common 
sense,  mutual  trust,  with  respect  for  all,  and  with  the 
aim  of  guiding  our  conduct  by  the  standard  of  liberty, 
justice  and  human  sympathy.  But  we  must  rightly 
understand  liberty.  We  must  resolutely  oppose  those 
who,  in  their  impatient  grasping  for  unattainable  per- 
fection, would  make  of  liberty  a  raging  and  destructive 
torrent  instead  of  a  majestic  and  fertilizing  stream. 

Liberty  is  not  fool-proof.  For  its  beneficent  work- 
ing it  demands  self-restraint,  a  sane  and  clear  recog- 
nition of  the  reality  of  things,  of  the  practical  and 
attainable,  and  a  realization  of  the  fact  that  there  are 
laws  of  nature  and  of  economics  which  are  immutable 
and  beyond  our  power  to  change. 

Nothing  in  history  is  more  pathetic  than  the  record 
of  the  instances  when  one  or  the  other  of  the  peoples 
of  the  world  rejoicingly  followed  a  new  lead  which  it 
was  promised  and  fondly  believed  would  bring  it  to 
freedom  and  plenty  and  happiness,  and  then  suddenly 
found  itself,  instead,  on  the  old  and  only  too  well- 
trodden  lane  which  goes  through  suffering  and  turmoil 
to  disillusionment  and  reaction. 

I  suppose  most  of  us  when  we  were  twenty  knew  of 
a  short  cut  to  the  millennium  and  were  impatient,  re- 


THE      TASK     AHEAD  31  1 

sentful  and  rather  contemptuous  of  those  whose  fos- 
silized prejudices  or  selfishness,  as  we  regarded  them, 
prevented  that  short-cut  from  becoming  the  highroad 
of  humanity. 

Now  that  we  are  older,  though  we  know  that  our 
eyes  will  not  behold  the  millennium,  we  should  still  like 
the  nearest  possible  approach  to  it,  but  we  have 
learned  that  no  short-cut  leads  there  and  that  anybody 
who  claims  to  have  found  one  is  either  an  imposter 
or  self-deceived. 

Among  those  wandering  sign-posts  to  Utopia  we  find 
and  recognize  certain  recurrent  types: 

There  are  those  who  in  the  fervor  of  their  world- 
improving  mission  discover  and  proclaim  certain  cure- 
alls  for  the  ills  of  humanity,  which  they  fondly  and 
honestly  believe  to  be  new  and  unfailing  remedies,  but 
which,  as  a  matter  of  fact,  are  hoary  with  age,  having 
been  tried  on  this  old  globe  of  ours  at  one  time  or 
another,  in  one  of  its  parts  or  another,  long  ago — 
tried  and  found  wanting  and  discarded  after  sad  dis- 
illusionment. 

There  are  the  spokesmen  of  sophomorism  rampant, 
strutting  about  in  the  cloak  of  superior  knowledge,  mis- 
chievously and  noisily,  to  the  disturbance  of  quiet  and 
orderly  mental  processes  and  sane  progress. 

There  are  the  sentimental,  unseasoned,  intolerant  and 
cocksure  "advanced  thinkers"  claiming  leave  to  set  the 
world  by  the  ears,  and  with  their  strident  and  ceaseless 
voices  to  drown  the  views  of  those  who  are  too  busy 
doing  to  indulge  in  much  talking. 

There  are  the  self-seeking  demagogues  and  various 


312  BUSINESS      AND      ECONOMICS 

related  types,  and  finally  there  are  the  preachers  and 
devotees  of  liberty  run  amuck,  who  in  fanatical  obses- 
sion would  place  a  visionary  and  narrow  class  interest 
and  a  sloppy  internationalism  above  patriotism,  and 
with  whom  class  hatred  and  envy  have  become  a  ruling 
passion.  They  are  perniciously,  ceaselessly  and  vocif- 
erously active,  though  constituting  but  a  small  minor- 
ity of  the  people,  and  though  every  election  and  other 
test  has  proved,  fortunately,  that  they  are  not  repre- 
sentative of  labor,  either  organized  or  unorganized. 

AMERICA 

Among  these  agitators  and  disturbers  who  dare  clam- 
orously to  assail  the  majestic  and  beneficent  structure 
of  American  traditions,  doctrines  and  institutions  there 
are  some,  far  too  many,  indeed — I  say  it  with  deep 
regret,  being  myself  of  foreign  birth — who  are  of  for- 
eign parentage  or  descent.  With  many  hundreds  of 
thousands  they  or  their  parents  came  to  our  free  shores 
from  lands  of  oppression  and  persecution.  The  great 
republic  generously  gave  them  asylum  and  opened  wide 
to  them  the  portals  of  her  freedom  and  her  opportuni- 
ties. 

The  great  bulk  of  these  newcomers  have  become  loyal 
and  enthusiastic  Americans.  Most  of  them  have  proved 
themselves  useful  and  valuable  elements  in  our  many- 
rooted  population.  Some  of  them  have  accomplished 
eminent  achievements  in  science,  industry  and  the  arts. 
Certain  of  the  qualities  and  talents  which  they  con- 
tribute to  the  common  stock  are  of  great  worth  and 
promise. 


THE      TASK     AHEAD  313 

When  the  great  test  of  the  war  came,  the  over- 
whelming majority  of  them  rang  wholly  and  finely 
true.  The  casualty  lists  are  eloquent  testimony  to  the 
patriotic  devotion  of  "the  children  of  the  crucible," 
doubly  eloquent  because  many  of  them  fought  against 
their  own  kith  and  kin. 

But  some  there  are  who  have  been  blinded  by  the 
glare  of  liberty  as  a  man  is  blinded  who,  after  long 
confinement  in  darkness,  comes  suddenly  into  the  strong 
sunlight.  Blinded,  they  dare  to  aspire  to  force  their 
guidance  upon  Americans  who  for  generations  have 
walked  in  the  light  of  liberty. 

They  have  become  drunk  with  the  strong  wine  of 
freedom,  these  men  who  until  they  landed  on  America's 
coasts  had  tasted  little  but  the  bitter  water  of  tyranny. 
Drunk,  they  presume  to  impose  their  reeling  gait  upon 
Americans  to  whom  freedom  has  been  a  pure  and  re- 
freshing fountain  for  a  century  and  a  half. 

Brooding  in  the  gloom  of  age-long  oppression,  they 
have  evolved  a  fantastic  and  distorted  image  of  free 
government.  In  fatuous  effrontery  they  seek  to  graft 
the  growth  of  their  stunted  vision  upon  the  splendid 
and  ancient  tree  of  American  institutions. 

Admitted  in  generous  trust  to  the  hospitality  of 
America,  they  grossly  violate  not  only  the  dictates  of 
common  gratitude,  but  of  those  elementary  rules  of 
respect  and  consideration  which  immemorial  custom 
imposes  upon  the  newcomer  or  guest.  They  seek,  in- 
deed, to  uproot  the  foundations  of  the  very  house  which 
gave  them  shelter. 

We  will  not  have  it  so,  we  who  are  Americans  by 


314  BUSINESS     AND      ECONOMICS 

birth  or  by  adoption.  We  reject  these  impudent  pre- 
tensions. By  all  means,  let  us  move  forward  and  up- 
ward, let  us  bring  cheer  and  comfort  where  there  are 
wretchedness  and  squalor,  beauty  where  there  is  ugli- 
ness, right  where  there  is  wrong,  freedom  where  there 
is  oppression.  But  let  us  proceed  by  the  chart  of  rea- 
son, experience  and  tested  American  principles  and  doc- 
trines, and  let  us  not  entrust  our  ship  to  demagogues, 
visionaries  or  shallow  sentimentalists  who  most  assur- 
edly would  steer  it  on  the  rocks. 

When  you  once  leave  the  level  road  of  Americanism 
to  set  foot  up  the  incline  of  Socialism,  it  is  no  longer 
in  your  power  to  determine  where  you  will  stop.  It 
is  an  axiom  only  too  well  attested  by  the  experience 
of  the  past,  that  the  principal  elements  of  the  estab- 
lished order  of  civilization  (of  which  the  institution  of 
private  property  is  one)  are  closely  interrelated.  If 
you  tolerate  grave  infringement  upon  any  of  these 
elements,  all  history  shows  that  you  will  have  laid  open 
to  assault  the  foundations  of  personal  liberty,  of  orderly 
processes  of  government,  of  justice  and  tolerance,  as 
well  as  the  institution  of  marriage,  the  sanctity  of  the 
home,  and  the  principles  and  practices  of  religion. 

The  strident  voices  of  the  fomentors  of  unrest  do 
not  cause  me  any  serious  apprehension,  but  we  must 
not  sit  silently  by,  we  must  not  look  on  inactively. 
Where  there  are  grievances  to  redress,  where  there  are 
wrongs  existing,  we  all  must  aid  in  trying  to  right  them 
to  the  best  of  our  conscience  and  ability. 

But  to  the  false  teachings  and  the  various  pernicious 
"isms"  with  which  un-Americans,' fifty  per  cent.  Amei- 


THE     TASK     AHEAD  3X5 

icans  or  anti-Americans  are  flooding  the  country,  we 
must  give  battle  through  an  organized,  persistent,  pa- 
tient, nationwide  campaign  of  education,  of  informa- 
tion, of  sane  and  sound  doctrine.  The  masses  of  the 
American  people  want  what  is  right  and  fair,  but  they 
"want  to  be  shown."  They  will  not  simply  take  our 
word  for  it  that  because  a  thing  is  so  and  has  always 
been  so,  therefore  it  should  remain  so.  They  do  not 
mean  to  stand  still.  They  want  progress.  They  have 
no  use  for  the  standpatter  and  reactionary. 

Even  before  the  war  a  great  stirring  and  ferment 
was  going  on  in  the  land.  The  people  were  groping, 
seeking  for  a  new  and  better  condition  of  things.  The 
war  has  intensified  that  movement.  It  has  torn  great 
fissures  in  the  ancient  structure  of  our  civilization.  To 
restore  it  will  require  the  co-operation  of  all  patriotic 
men  of  sane  and  temperate  views,  whatever  may  be 
their  occupation  or  calling  or  political  affiliations. 

It  can  not  be  restored  just  as  it  was  before.  The 
building  must  be  rendered  more  habitable  and  attrac- 
tive to  those  whose  claim  for  adequate  house-room  can 
not  be  left  unheeded  either  justly  or  safely.  Some 
changes,  essential  changes,  must  be  made.  I  have  no 
fear  of  the  outcome  and  of  the  readjustment  which 
must  come.  I  have  no  fear  of  the  forces  of  freedom 
unless  they  be  ignored,  repressed  or  falsely  or  selfishly 
led. 

Changes  the  American  people  will  make  as  their 
needs  become  apparent,  improvements  they  welcome, 
the  greatest  attainable  well-being  for  all  those  under 
our  national  roof-tree  is  their  aim.    They  will  strive  to 


3l6  BUSINESS      AND      ECONOMICS 

realize  what  formerly  were  considered  unattainable 
ideals.  But  they  will  do  that  in  the  American  way  of 
sane  and  orderly  progress — and  in  no  other. 

They  will  not  soon  forget  who  failed  the  Nation  in 
the  hour  of  test  and  trial.  Nor  will  they  be  unmindful 
of  the  demonstrated  fact  that  the  extreme  of  autocracy 
in  Germany  and  the  extreme  of  socialism  in  Russia  have 
led  to  precisely  the  same  result  for  the  people  af- 
flicted by  them — namely,  bloodshed,  chaos,  disaster 
and  disgrace. 

Whatever  betide  in  European  countries,  this  nation 
will  not  be  torn  from  its  ancient  moorings.  Against 
foes  within,  no  less  than  against  enemies  without,  the 
American  people  will  ever  know  how  to  preserve  and 
protect  the  splendid  structure  of  light  and  order,  which 
is  the  treasured  inheritance  of  all  those  who  rightfully 
bear  the  name  Americans,  whatever  their  race  and 
origin. 


A: 


ROOSEVELT  AND  BUSINESS 


.S  a  business  man  it  may  not  be  inappropriate  that 
I  say  a  few  words  concerning  the  late  Colonel  Roose- 
velt's attitude  toward  business. 

Contrary  to  the  opinion  held  at  one  time  by  many, 
he  was  a  true  friend  to  business.  He  was  interested 
in  the  furtherance  of  business  as  he  was  interested  in 
the  furtherance  of  every  one  of  the  callings  which  have 
a  legitimate  part  in  the  makeup  of  the  nation's  activi- 
ties. He  fully  realized  the  importance  to  national 
well-being  of  the  growth  and  prosperity  of  trade  and 
commerce.  He  appreciated  the  place  of  finance  in  the 
scheme  of  things.  He  had  due  regard  for  the  tested 
lessons  of  sound  economics. 

He  was  no  trained  business  man,  but  his  unfailing 
intuition  of  what  was  right  and  sane  and  timely  re- 
vealed to  him  the  need  and  the  advantage  as  well  as  the 
proper  limits  of  reform  in  respect  of  business  prac- 
tices and  conceptions  which  had  grown  up,  naturally 
and  almost  necessarily,  during  the  surging  period  of 
immense  material  development  that  set  in  with  the  close 
of  the  Civil  War.  He  saw  that  business  had  grown  to 
exercise  excessive  and,  in  certain  aspects,  almost  un- 
controlled power,  and  he  knew  that  such  power,  when- 
ever, wherever,  and  by  whomsoever  exercised,  breeds 
abuses  and  is  a  menace  to  the  State  and  in  the  unavoid- 

October,   191 9. 

317 


3l8  BUSINESS     AND      ECONOMICS 

ably  resulting  ultimate  consequences,  a  grave  danger 
to  the  class  that  wields  it. 

He  determined  to  challenge  that  power,  to  impose 
reasonable  restraints  and  regulations  upon  it.  He  was 
convinced  that  if  it  were  left  to  run  its  course  un- 
checked, the  inevitable  result,  in  due  course  of  time, 
would  be  a  violent  reaction  against  it,  big  with  the 
potentialities  of  great  harm  to  the  legitimate  interests 
of  business  as  well  as  to  the  people  at  large  and  to 
American  institutions.  He  framed  his  program  without 
heat  or  animosity,  with  that  sure  adaptation  of  the 
means  to  the  end,  with  that  practical  common  sense  and 
that  avoidance  of  theories  and  extremes,  which  al- 
ways characterized  his  mental  processes  and  his  actions 
in  office. 

It  took  courage  at  that  time  to  challenge  seriously 
the  power  of  business,  and  to  summon  it  to  surrender 
certain  prerogatives  which  it  had  gradually  acquired 
and  which  it  had  come  to  regard  as  naturally  and 
justly  due  to  it.  It  had  never  been  thus  seriously  and 
definitely  challenged  before.  What  afterward  became 
a  pastime  that  any  one  could  indulge  in  with  impunity 
and  with  supposed  political  advantage,  what  afterward 
became  "business  baiting"  and  harassing  bureaucratic 
over-regulation,  was  an  act  of  bold  and  hazardous 
resolution  at  the  time  and  under  the  circumstances  when 
Roosevelt  undertook  it. 

He  encouraged  the  co-operation  of  leading  business 
men  in  framing  and  carrying  out  the  measures  which 
he  believed  to  be  called  for  and  which  he  was  convinced 
would  prove  ultimately  for  the  best  interest  of  business 


ROOSEVELT     AND      BUSINESS  319 

itself.  They  refused.  They  believed  themselves  strong 
enough  to  defeat  his  purposes.  They  tried  to  dissuade 
him,  failing  in  which  they  set  out  to  antagonize  and 
thwart  him.  They  did  not  succeed,  but  the  conse- 
quence of  their  attitude  was  that  a  bitter  conflict  was 
created  between  Colonel  Roosevelt  and  representatives 
of  business,  and  that  as  a  result  he  felt  himself  called 
upon  to  have  recourse  to  vigorous  and  incisive  appeals 
to  public  opinion,  appeals  which,  at  times  in  the  heat 
of  battle,  went  somewhat  beyond  the  mark,  as  I  think 
he  would  have  been  the  first  to  acknowledge  later  on. 

Yet  while  the  irritation  and  the  heat,  stress,  and 
strain  of  the  fight  colored  his  utterances  and  on  a  few 
occasions  affected  his  actions  in  individual  cases,  he 
never  permitted  himself,  in  the  legislative  measures 
which  he  advocated  and  promoted,  to  go  beyond  the 
bounds  of  moderation  and  the  limits  of  reasonable  cor- 
rection. The  laws  for  which  he  stood  during  his  Presi- 
dential terms  appear  conservative  compared  to  some 
of  those  enacted  in  subsequent  years.  In  the  midst  of 
hard  blows  given  and  taken,  he  retained  his  unfailing 
sense  of  what  was  sane,  balanced,  fair,  practicable, 
called  for.  Vindictiveness  did  not  enter  into  his  pro- 
gram. 

Each  one  of  the  measures  for  which  he  became  spon- 
sor in  the  great  reform  movement  that  he  inaugurated 
has  stood  the  test  of  time.  None  of  them  has  harmed 
or  impeded  legitimate  business,  however  big  in  scope. 

And  just  as  he  had  the  courage  to  tackle  "big  busi- 
ness" in  the  hey-day  of  its  power  and  to  devise  and 
enforce  wise  and  just  restraints  and  remedies,  so  he 


320  BUSINESS      AND      ECONOMICS 

would  have  had  the  courage  to  tackle  and  bring  under 
restraint  any  other  element  or  combination  which  came 
to  exercise  a  degree  of  power  incompatible  with  the 
welfare  and  disturbing  to  the  due  balance  of  the  com- 
munity at  large,  and  which  tended  to  become  a  law 
unto  itself. 

It  was  my  great  honor  and  privilege  to  be  consulted 
by  Colonel  Roosevelt  from  time  to  time,  in  the  course 
of  the  past  few  years,  as  to  the  economic  and  business 
problems  of  the  day.  I  know,  therefore,  how  his  mind 
worked  and  his  purposes  shaped  themselves  in  respect 
of  these  problems.  And  I  know  that  if  he  had  been 
called  again  to  the  leadership  of  the  nation,  as  he  un- 
doubtedly would  have  been  but  for  the  national  calam- 
ity of  his  untimely  death,  he  would  have  wrought  a 
structure  of  laws  and  administration  in  which  hamper- 
ing paternalism,  visionary  theories,  class-serving  ten- 
dencies and  outlandish  fallacies  would  have  had  no 
place;  in  which  all  constructive  forces  would  have  had 
free  scope,  and  short  shrift  would  have  been  given  to 
the  evil  disposed,  high  or  low ;  and  in  which  the  clash- 
ing interests,  distracting  agitations  and  confusing  aims 
and  claims  that  are  now  harassing  the  country  would 
have  found  themselves  under  the  dominance  of  a  strong 
peace  of  even-handed  and  enlightened  justice  and  un- 
diluted Americanism. 

I  have  prepared  this  statement  at  the  suggestion  of 
the  Roosevelt  Memorial  Association.  I  am  profoundly 
convinced  that  no  section  of  the  community  has  greater 
cause  to  aid  in  seeking  to  perpetuate  the  Roosevelt  spirit 
in  the  affairs  and  the  guidance  of  the  nation  than  the 
business  men  of  America. 


PART  THREE:  CONCERNING  WAR  AND 
FOREIGN  RELATIONS 


FRANCE 

RANCE,  glorious  among  the  nations,  and  best 
beloved ! 

Immeasurable  is  the  debt  which  the  world  owes  to 
France.  Her  name  stands  foremost  in  the  world's 
golden  book  of  deeds  nobly  done  for  liberty  and  hu- 
manity, of  lives  nobly  lived,  of  deaths  nobly  died. 

From  the  time  of  the  Crusaders  to  this  day  her  chil- 
dren have  ever  been  ready  to  go  forth  and  die  for  an 
ideal.  Beneath  their  smiling  blague,  beneath  their 
light-hearted  etourderie,  there  always  lay  the  deep  and 
serious,  ardent  and  lofty  qualities  of  an  illustrious  race ; 
there  always  lay  their  great  spirit,  lightly  slumbering 
at  times,  but  ever  ready  to  leap  forth,  undimmed  and 
undiminished,  in  answer  to  a  great  call. 

No  pages  more  splendid  are  contained  in  the  book 
of  history  than  those  which  tell  of  the  heroism,  the 
dignity,  the  calm  and  determination  of  the  men — aye, 
and  of  the  women — of  France,  in  doing,  daring  and 
suffering  throughout  this  appalling  war  so  wantonly 
forced  upon  her. 

The  men  of  other  nations,  too,  have  fought  with 
superb  bravery.  Countless  almost  are  the  heroes  of  the 
past  thirty  months.  They  all  tendered  unhesitatingly 
the  supreme  gift  that  man  can  give.  Yet  if  it  be  per- 
missible in  due  reverence  to  appraise  the  value  of  that 

An  article  contributed  to  the  volume  "For  France,"  January,  1917. 

323 


324      WAR    AND    FOREIGN    RELATIONS 

sacrifice,  it  may,  I  think,  be  said  that  the  men  of  France 
gave  most,  because,  in  the  sense  of  a  generalization, 
I  believe  it  to  be  true  that  to  none  others  is  life  quite 
as  sweet  and  precious  as  to  the  children  of  France,  "le 
doux  pays  de  France." 

The  men  of  France  do  indeed  love  life,  but  they 
love  France  more,  her  soil,  her  soul  and  all  that  she 
symbolizes.  To  her,  they  belong  with  every  fibre  of 
their  being.  She  is  to  them  not  merely  the  present, 
but  the  past  and  the  future ;  wife,  mother  and  child. 

And  so  they  went  forth,  in  defense  of  their  sacred 
soil  and  their  ideals  of  humanity  and  liberty,  and  per- 
formed prodigies  of  valor  and  shed,  alas !  rivers  of 
French  blood,  not  driven  by  iron  discipline,  not  stimu- 
lated by  lust  for  conquest  or  zest  for  combat,  not  even 
spurred  on  by  hatred;  but  soberly,  solemnly,  sternly, 
steeled  to  supreme  resolution  and  resigned  to  die  that 
France  might  live  in  safety  and  glory. 

God  grant  that  an  end  may  swiftly  come  to  this 
appalling  trial  and  that  what  those  heroes  have  fought 
and  suffered  and  died  for,  may  soon  be  attained. 

And  when  we,  who  have  spent  some  of  our  happiest 
days  in  France,  who  have  known  her  gay  and  care- 
free and  full  of  the  joie  de  vivre  set  foot  upon  her  soil 
once  more,  let  us  remember  that  it  has  become  sacred 
soil.  Let  us  enter  her  portals  in  a  mood  and  spirit 
attuned  to  her  grandeur  and  her  sorrow.  Let  us  meet 
her  with  overflowing  sympathy,  with  deep  reverence, 
with  zealous  service.  Let  us  be  bent  on  giving,  not 
on  receiving.  We  owe  her  a  debt  beyond  all  reckoning. 
Let  us  be  eager  for  the  privilege  of  repaying  what  little 


FRANCE  325 

fraction  it  may  be  in  our  power  to  repay  by  helping  to 
care  for  her  needs  and  her  needy,  by  assisting  her  in  the 
staggering  task  of  reconstruction,  by  aiding  to  bind  up 
the  hurts — deep,  alas!  and  many — which  she  has  suf- 
fered in  the  service  of  humanity. 


WHEN  THE  TIDE  TURNED 


T 


WHY   THE   TIDE    WAS    FATED  TO   TURN 


HESE  are  soul-stirring  days.  To  live  through 
them  is  a  glory  and  a  solemn  joy.  The  words  of  the 
poet  resound  in  our  hearts:  "God's  in  His  heaven, 
all's  well  with  the  world." 

Events  have  shaped  themselves  in  accordance  with 
the  eternal  law.  Once  again  the  fundamental  lesson 
of  all  history  is  borne  in  upon  the  world, — that  evil, 
though  it  may  seem  to  triumph  for  a  while,  carries 
within  it  the  seed  of  its  own  dissolution.  Once  again 
it  is  revealed  to  us  that  the  God-inspired  soul  of  man 
is  unconquerable,  and  that  the  power,  however  formi- 
dable, which  challenges  it  is  doomed  to  go  down  in 
defeat. 

A  righteous  cause  will  not  only  stand  unshaken 
through  trials  and  discomfiture,  but  it  will  draw 
strength  from  the  very  set-backs  which  it  may  suffer. 
A  wrongful  cause  can  only  stand  as  long  as  it  is  buoyed 
up  by  success. 

The  German  people  were  sustained  by  a  sheer  ob- 
session, akin  to  the  old-time  belief  in  the  potent  spell 


An   address  at  the   United  War  Work   Campaign  Meeting,  Boston 
Athletic  Association,  November  11,   1918    (Armistice  Day). 

326 


WHEN      THE      TIDE      TURNED  327 

of  "the  black  arts"  that  their  military  masters  were 
invulnerable  and  invincible,  that  by  some  power — 
good  or  evil,  they  did  not  care  which — they  had  been 
made  so,  and  that  the  world  was  bound  to  fall  before 
them. 

The  nation  was  immensely  strong  only  as  long  as  that 
obsession  remained  unshaken.  With  its  destruction  by 
a  series  of  defeats  which  were  incapable  of  being  ex- 
plained as  "strategic  retreats,"  their  morale  crumbled 
and  finally  collapsed,  because  it  was  not  sustained,  as 
that  of  the  Allies  was  sustained  in  the  darkest  days  of 
the  war,  by  the  faith  that  they  were  fighting  for  all 
that  men  hold  most  sacred. 

To  those  who  were  acquainted  with  German  men- 
tality and  psychology,  it  had  been  manifest  all  along 
that  when  the  end  foreordained  did  come,  it  would 
come  with  catastrophic  suddenness. 

II 

WHERE  THE  TIDE  TURNED 

It  is  the  general  impression  that  the  tide  of  victory 
set  in  with  Marshal  Foch's  splendid  movement  against 
the  German  flank  on  July  18th.  That  movement,  it 
is  true,  started  the  irresistible  sweep  of  the  wave  which 
was  destined  to  engulf  and  destroy  the  hideous  power 
of  Prussianism.  But  the  tide  which  gathered  and  drove 
forward  the  waters  out  of  which  that  wave  arose,  had 
turned  before.  It  turned  with  and  through  the  su- 
preme valor  of  our  Marines  and  other  American  troops 


328      WAR    AND     FOREIGN     RELATIONS 

in  the  first  battle  at  Chateau-Thierry  and  at  Belleau 
Wood,  in  the  first  week  of  June. 

The  American  force  engaged  was  small,  measured 
by  the  standard  of  numbers  to  which  we  have  become 
accustomed  in  this  war,  but  the  story  of  their  fighting 
will  remain  immortal  and  in  its  psychological  and 
strategic  consequences  the  action  will  take  rank,  I 
believe,  among  the  decisive  battles  of  the  war. 

I  am  not  speaking  from  hearsay.  I  was  in  France 
during  the  week  preceding  that  battle,  the  most  anxious 
and  gloomy  period,  probably,  of  the  entire  war.  What 
I  am  about  to  relate  is  based  either  on  authoritative 
information  gathered  on  the  spot,  or  on  my  own 
observations. 

In  telling  it,  nothing  is  farther  from  my  thoughts 
than  to  wish  to  take  away  one  tittle  from  the  immortal 
glory  which  belongs  to  the  Allied  armies,  nor  from  the 
undying  gratitude  which  we  owe  to  the  nations  who 
for  four  heart-breaking  years,  with  superb  heroism, 
fought  the  battle  of  civilization — our  battle  from  the 
very  beginning,  no  less  than  theirs — and  bore  untold 
sacrifices  with  never  faltering  spirit. 

Ill 

JUST  BEFORE  THE  TIDE  TURNED 

On  the  27  th  of  May,  1918,  the  Germans  broke 
through  the  French  position  at  the  Chemin  des  Dames, 
a  position  which  had  been  considered  by  the  Allies 
as  almost  impregnable.  They  overthrew  the  French 
as  they  had  overthrown  the  British  two  months  earlier. 


WHEN      THE     TIDE      TURNED  329 

Day  by  day  they  came  nearer  to  Paris,  until  only  thirty- 
nine  miles  separated  them  from  their  goal.  A  few 
days  more  at  the  same  rate  of  advance,  and  Paris  was 
within  range  of  the  German  guns  of  terrific  destructive 
power. 

Paris,  the  nerve  centre  of  the  French  railroad  system 
and  the  seat  of  many  French  war  industries,  not  only, 
but  the  very  heart  of  France,  far  more  to  the  French 
people  in  its  meaning  and  traditions  than  merely  the 
capital  of  the  country;  Paris  in  imminent  danger  of 
ruthless  bombardment  like  Rheims,  in  possible  danger 
even  of  conquest  by  the  brutal  invader,  drunk  with 
lust  and  with  victory!  As  one  Frenchman  expressed 
it  to  me :  "We  felt  in  our  faces  the  very  breath  of  the 
approaching  beast." 

And  while  the  Hunnish  hordes  came  nearer  and 
nearer,  and  the  very  roar  of  the  battle  could  be  dimly 
and  ominously  heard  from  time  to  time  in  Paris,  there 
were  air  raids  over  the  city  practically  every  night,  and 
the  shells  from  the  long-range  monster  guns  installed 
some  sixty  or  seventy  miles  distant,  fell  on  its  houses, 
places  and  streets  almost  every  day. 

They  were  not  afraid,  these  superb  men  and  women 
of  France.  They  do  not  know  the  meaning  of  fear  in 
defense  of  their  beloved  soil  and  their  sacred  ideals. 
There  was  no  outward  manifestation  even  of  excite- 
ment or  apprehension.  Calmly  and  resolutely  they 
faced  what  destiny  might  bring.  But  there  was  deep 
gloom  in  their  hearts  and  dire  forebodings. 

They  had  fought  and  dared  and  suffered  and  sacri- 
ficed for  well  nigh  four  years.    They  had  buried  a  mil- 


330     WAR    AND    FOREIGN    RELATIONS 

lion  of  their  sons,  brothers  and  fathers.  They  were 
bleeding  from  a  million  wounds  and  more.  "We  will 
fight  on,"  they  said,  "to  our  last  drop  of  blood,  but 
alas !  our  physical  strength  is  ebbing.  The  enemy  is 
more  numerous  by  far  than  we.  When  can  we  look 
for  aid?  The  British  have  just  suffered  grave  defeat. 
The  Italians  have  their  own  soil  to  defend  after  the 
disaster  of  last  autumn.  Our  troops  are  in  retreat.  The 
Americans  are  not  ready  and  they  are  untried  as  yet  in 
the  fierce  ordeal  of  modern  warfare.  The  Germans 
know  well  that  in  three  months  or  six  months  the  Amer- 
icans will  be  ready  and  strong  in  numbers.  That  is 
why  they  are  throwing  every  ounce  of  their  formidable 
power  against  us  now.  The  Hun  is  at  the  gate  now. 
Immeasurable  consequences  are  at  stake  now.  It  is  a 
question  of  days,  not  of  weeks  or  months.  Where  can 
we  look  for  aid  now?" 

And  out  of  their  nooks  and  corners  and  hiding  places 
crawled  forth  the  slimy  brood  of  the  Bolshevik-Social- 
ists, of  the  Boloists,  Caillouxists  and  pacifists,  and  they 
hissed  into  the  ears  of  the  people,  "Make  peace!  Vic- 
tory has  become  impossible.  Why  go  on  shedding 
rivers  of  blood  uselessly*?  The  Germans  will  give  you 
an  honorable,  even  a  generous  peace.  Save  Paris! 
Make  peace !" 

The  holy  wrath  of  France  crushed  those  serpents 
whenever  their  heads  became  visible.  Clemenceau,  the 
embodiment  of  the  dauntless  spirit  of  France,  stood 
forth  the  very  soul  of  patriotic  ardor  and  indomitable 
courage.  But  the  serpents  were  there,  crawling  hidden 
in  the  grass,  ever  hissing,  "Make  peace!" 


WHEN      THE      TIDE      TURNED  33 1 

And  then,  suddenly  out  of  the  gloom  flashed  the 
lightning  of  a  new  sword,  sharp  and  mighty,  a  sword 
which  never  had  been  drawn  except  for  freedom,  a 
sword  which  never  had  known  defeat — the  sword  of 
America ! 

IV 

THE  TURNING  OF   THE   TIDE 

A  division  of  Marines  and  other  American  troops 
were  rushed  to  the  front  as  a  desperate  measure  to 
try  and  stop  a  gap  where  flesh  and  blood,  even  when 
animated  by  French  heroism,  seemed  incapable  of  fur- 
ther resistance.  They  came  in  trucks,  in  cattle  cars,  by 
any  conceivable  kind  of  conveyance,  crowded  together 
like  sardines.  They  had  had  little  food,  and  less  sleep, 
for  days. 

When  they  arrived,  the  situation  had  become  such 
that  the  French  command  advised,  indeed  ordered, 
them  to  retire.  But  they  and  their  brave  General 
would  not  hear  of  it.  They  detrained  almost  upon 
the  field  of  battle  and  rushed  forward,  with  little  care 
for  orthodox  battle  order,  without  awaiting  the  arrival 
of  their  artillery,  which  had  been  unable  to  keep  up 
with  their  rapid  passage  to  that  front. 

Onward  they  swept;  right  through  the  midst  of  a 
retreating  French  division,  yelling  like  wild  Indians, 
ardent,  young,  irresistible  in  their  fury  of  battle.  Some 
of  the  Frenchmen  called  out  a  well-meant  warning: 
"Don't  go  in  this  direction.  There  are  the  boches  with 
machine  guns."  They  shouted  back:  "That's  where 
we  want  to  go.    That's  where  we  have  come  three  thou- 


332      WAR    AND    FOREIGN     RELATIONS 

sand  miles  to  go."  And  they  stormed  ahead,  with  rifle 
and  bayonet,  against  massed  machine  guns. 

Arrived  at  the  designated  spot,  they  stood  and  faced 
the  foe.  Ahead  of  them,  some  200  yards  distant, 
was  a  rise  in  the  ground:  Beyond  it  were  the  Ger- 
mans, in  vast  numbers.  Our  men  set  the  sights  of  their 
rifles  at  200  yards.  They  had  little  artillery  and  few 
machine  guns.  But  they  had  their  American  spirit 
and  they  knew  how  to  shoot.  They  looked  at  the  rising 
ground  in  front  of  them,  gritted  their  teeth  and  said : 
"No  Hun  shall  pass  that  line."  And  no  Hun  did  pass 
that  line. 

And,  after  a  while,  they  threw  themselves  upon  the 
victory-flushed  enemy  to  whom  this  unconventional 
kind  of  fierce  onset  came  as  a  complete  and  discon- 
certing surprise.  They  fought  like  demons,  with  ut- 
terly reckless  bravery.  They  paid  the  price,  alas!  in 
staggering  losses,  but  for  what  they  paid  they  took 
compensation  in  overfull  measure. 

They  formed  of  themselves  a  spearhead  at  the  point 
nearest  Paris,  against  which  the  enemy's  onslaught 
shattered  itself  and  broke.  They  stopped  the  Hun, 
they  beat  him  back,  they  broke  the  spell  of  his  advance. 
They  started  victory  on  its  march. 

A  new  and  unspent  and  mighty  force  had  come  into 
the  fray.  And  the  Germans  knew  it  to  their  cost  and 
the  French  knew  it  to  their  relief  and  joy.  Side  by 
side  now  the  Americans  and  the  French  stood,  and  on 
that  part  of  the  front  the  Germans  never  advanced 
another  inch  from  that  day.  They  held  for  awhile, 
and  then  set  in  the  beginning  of  the  great  defeat. 


WHEN      THE      TIDE      TURNED  333 

I  was  in  Paris  when  the  news  of  the  American 
achievement  reached  the  population.  They  knew  full 
well  what  it  meant.  The  danger  was  still  present,  but 
the  crisis  was  over.  The  Boche  could  not  break  through. 
He  could  and  would  be  stopped  and  ultimately  thrown 
back,  out  of  France,  out  of  Belgium,  across  the  Rhine 
and  beyond ! 

The  aid  for  which  the  sorely  beset  people  of  France 
had  been  praying  had  arrived.  The  Americans  had 
come,  young,  strong,  daring,  eager  to  fight,  capable  of 
standing  up  against  and  stopping  and  beating  back 
German  shock  troops  specially  selected  and  trained,  and 
spurred  on  by  the  belief  in  their  own  irresistibility  and 
the  exhaustion  of  their  opponents.  The  full  wave  of 
the  hideous  instruments  of  warfare  which  the  devilish 
ingenuity  of  the  Germans  had  invented,  liquid  fire, 
monstrous  shells,  various  kinds  of  gases  including  the 
horrible  mustard  gas,  had  struck  the  Americans  square- 
ly and  fully,  and  they  had  stood  and  fought  on  and 
won. 

The  French,  so  calm  in  their  trials,  so  restrained  in 
their  own  victories,  gave  full  vent  to  their  joy  and 
enthusiasm  at  the  splendid  fighting  and  success  of  the 
Americans.  The  talk  of  them  was  everywhere  in  Paris. 
Hundreds  of  thousands  of  American  soldiers  already  in 
France,  thousands  coming  upon  every  steamer,  millions 
more  to  come  if  needed — and  they  had  shown  the  great 
stuff  they  were  made  of!  All  gloom  vanished  over- 
night. The  full  magnificence  of  the  French  fighting 
morale  shone  out  again — both  behind  the  lines  and  at 
the  front.     "lis  ne  passeront  pas!"     "On  les  aura!" 


334     WAR    AND     FOREIGN     RELATIONS 

And  the  Bolshevik-Socialists,  Boloists,  weak-kneed 
pacifists,  and  that  whole  noisome  tribe  slunk  back  into 
their  holes  and  corners  and  hiding  places,  and  never 
emerged  again. 

And,  as  the  people  of  Paris  and  the  poilus  at  the 
front  correctly  interpreted  the  meaning  of  that  battle 
in  those  early  days  of  June,  so  did  the  supreme  military 
genius  of  Marshal  Foch  interpret  it.  He  knew  what 
the  new  great  fighting  force  could  do  which  had  come 
under  his  orders,  and  he  knew  what  he  meant  to  do  and 
could  do  with  it. 

It  is  an  eloquent  fact  that  when  six  weeks  later  he 
struck  his  great  master  stroke  which  was  to  lead  ulti- 
mately to  the  utter  defeat  and  collapse  of  the  enemy, 
American  troops  formed  the  larger  portion  of  an  at- 
tacking force  which,  being  thrown  against  a  particu- 
larly vital  position,  was  meant  to  deal  and  did  deal 
the  most  staggering  blow  to  the  enemy;  and  other 
American  troops  were  allotted  the  place  which  from 
the  paramount  responsibility  attaching  to  it,  may  be 
termed  the  place  of  honor,  in  the  center  of  the  line,  in 
immediate  defense  of  the  approaches  to  Paris. 

They  made  good  there — officers  and  men  alike.  They 
made  good  everywhere,  from  Cantigny  to  Sedan.  They 
made  good  on  land,  on  the  seas  and  in  the  air;  worthy 
comrades  of  the  war-seasoned  heroes  of  France  and 
Great  Britain,  worthy  defenders  of  American  honor, 
eager  artisans  of  American  glory.  When,  for  the  first 
time  the  American  army  went  into  action  as  a  separate 
unit  under  the  direct  command  of  its  great  chief,  Gen- 
eral Pershing,  Marshal  Foch  allotted  them  ten  days 


WHEN      THE      TIDE      TURNED  335 

for  the  accomplishment  of  the  task  set  for  them,  i.  e., 
the  ejection  of  the  German  army  from  the  strongly  for- 
tified St.  Mihiel  salient,  which  the  enemy  had  held  for 
four  years.  They  did  it  in  thirty  hours,  and  made  a 
complete  and  perfect  job  of  it. 

I  have  had  the  privilege  of  seeing  these  splendid 
boys  of  ours,  in  all  situations  and  circumstances,  from 
their  camps  in  America  to  the  front  in  France — the 
boys  and  their  equally  splendid  leaders.  The  inspira- 
tion of  what  I  have  thus  seen  will  stay  with  me  to  my 
last  day. 

I  confess  I  find  it  hard  to  speak  of  them  without  a 
catch  in  my  throat  and  moisture  in  my  eyes.  I  see 
them  before  me  now  in  the  fair  land  of  France — brave, 
strong,  ardent;  keen  and  quick-witted;  kindly  and  clean 
and  modest  and  wholly  free  from  boasting;  good- 
humored  and  good-natured;  willingly  submissive  to 
unaccustomed  discipline;  uncomplainingly  enduring  all 
manner  of  hardships  and  discomforts ;  utterly  contemp- 
tuous of  danger,  daring  to  a  fault,  holding  life  cheap 
for  the  honor  and  glory  of  America.  What  true  Amer- 
ican can  think  of  them  or  picture  them  without  hav- 
ing his  heart  overflow  with  grateful  and  affectionate 
pride? 

As  I  observed  our  Army  "over  there,"  I  felt  that  in 
them,  in  the  mass  of  them,  representing  as  they  do 
all  sections  and  callings  of  America,  there  had  re- 
turned the  ancient  spirit  of  knighthood.  I  measure  my 
words.  I  am  not  exaggerating.  If  I  had  to  find  one 
single  word  with  which  to  characterize  our  boys,  I 
should  select  the  adjective  "knightly." 


33^  WAR  AND  FOREIGN  RELATIONS 

A  French  officer  who  commanded  a  body  of  French 
troops,  fighting  fiercely  and  almost  hopelessly  in  Bel- 
leau  Wood  near  Chateau-Thierry  (since  then  officially 
designated  by  the  French  Government  as  the  Wood  of 
the  Marine  Brigade),  told  me  that  when  they  had  ar- 
rived almost  at  the  point  of  total  exhaustion,  suddenly 
the  Americans  appeared  rushing  to  the  rescue.  One  of 
the  American  officers  hurried  up  to  him,  saluted  and 
said  in  execrably  pronounced  French  just  six  words: 
"Vous — fatigues,  vous — partir,  notre  job."  "You — 
tired,  you — get  away,  our  job." 

And  right  nobly  did  they  do  their  job.  Need  I  ask 
whether  we  shall  do  ours*? 

V 

THE    TIDE   OF    OUR   GRATITUDE 

The  job  now  before  us  is  to  raise  the  needed  funds 
to  enable  the  organizations  included  in  the  United 
War  Work  Campaign  to  do  theirs.  No  one  who  has 
not  had  occasion  to  see  our  Army  over  there,  can 
fully  realize  how  much  of  comfort,  of  cheer  and 
of  home  feeling  these  organizations  are  bringing  to  our 
boys. 

For  these  boys  with  all  their  knightly  virtues  are 
very  human.  They  are  healthy  young  animals  with 
strong  appetites  for  food  and  for  recreation.  And  they 
have  an  intense  longing  for  home. 

The  feeling  of  the  long  distance  separating  them 
from  home  is  the  one  hardest  for  them  to  get  accus- 
tomed  and   resigned   to.      The  organizations   of  the 


WHEN      THE     TIDE      TURNED  337 

United  War  Work,  with  the  vast  ramifications  of  their 
beneficent  activities  in  all  places  where  our  Army  is 
fighting,  training,  constructing  or  resting  are  giving  to 
the  boys  something  akin  to  a  home,  something  which 
brings  the  sweet  and  eagerly  welcomed  touch  of  Amer- 
ican surroundings  and  atmosphere  into  the  strange  and 
unaccustomed  world  in  which  they  are  moving  for  the 
time  being. 

One  must  not  think  of  those  who  are  representing 
these  organizations  in  their  contact  with  the  Army,  as 
bespectacled  anaemic  beings.  They  are,  on  the  contrary, 
red-blooded  men  and  women,  with  warm  hearts  and 
sympathetic  understanding.  The  services  and  benefits 
of  the  great  organizations  they  represent  are  open  to 
any  and  every  man  wearing  the  United  States  uniform, 
irrespective  of  race  or  religion  or  antecedents.  No 
questions  are  asked,  and  every  one  is  made  cordially 
welcome  by  the  men  and  women  who  with  devoted  zeal, 
tirelessly,  courageously  and  self-sacrificingly,  often 
within  reach  of  shot  and  shell,  tend  to  the  wants  of  our 
boys. 

The  spirit  in  which  they  administer  their  task  is 
large  and  broad  and  of  wide  human  sympathy  and 
tolerance,  as  I  can  testify  from  personal  observation. 
They  realize  fully  that  they  are  not  dealing  with  saints 
or  aspirants  to  sainthood,  but  with  average  youth  and 
with  soldiering  youth  at  that.  And  they  know  what 
youth — clean,  vigorous,  normal  American  youth  wants 
and  appreciates  in  the  way  of  material  and  spiritual 
things.  They  know  the  temptations  besetting  youth, 
but  they  also  know  that  the  normal  American  boy 


338     WAR    AND     FOREIGN     RELATIONS 

would  far  rather  have  clean  enjoyment  than  tainted 
pleasures. 

They  are  offering  to  all  soldiers  comfort,  cheer, 
diversion,  instruction,  in  short,  the  opportunity  to 
gratify  every  legitimate  aspiration,  and  if  the  records 
show  that  our  Army  is  the  healthiest  and  cleanest  that 
ever  stood  in  the  field,  a  large  part  of  the  credit  for  this 
enviable  result  belongs  to  the  organizations  included  in 
the  United  War  Work  Campaign. 

The  extent  of  their  work  with  its  resultant  inesti- 
mable benefit  to  our  boys,  is  limited  only  by  the  greater 
or  lesser  liberality  with  which  the  country  will  respond 
to  their  appeal  for  funds — and,  surely,  no  liberality 
can  be  too  great  toward  those  who  fought  without- 
counting  the  cost  in  life  and  limb  for  our  honor,  glory 
and  safety.  And  if,  thank  God,  the  fighting  and  maim- 
ing and  killing  have  now  come  to  an  end,  let  us  give  in 
double  measure  as  a  peace-offering,  as  a  thanksgiving, 
as  a  tribute  to  the  memory  of  those  who  laid  down  their 
lives  for  America  and  for  humanity. 

Heaven  forbid  that  we  should  permit  an  impres- 
sion to  go  out  to  our  soldiers  that  we  took  good  care 
of  them  as  long  as  we  needed  them  to  stand  between 
us  and  the  enemy,  but  that  when  the  danger  to  us  is 
past,  we  fail  them.  The  debt  of  gratitude  which  we 
owe  to  them  cannot  be  measured  or  discharged  in 
money,  but  we  can  at  least  prove  to  them,  as  far  as 
we  can  express  it  by  giving,  that  we  love  them  with 
proud  and  tender  affection  and  that  their  well-being  is  a 
first  charge  upon  our  means. 


WHEN     THE     TIDE     TURNED  339 

America  has  broken  many  a  record  since  we  en- 
tered the  war.  There  is  one  record  yet  to  be  broken 
before  our  boys  come  home.  That  is  the  record  of  the 
outpouring  of  a  nation's  gratitude  to  its  defenders. 

VI 

THE   TIDE   OF   PEACE 

For  some  time  past  we  have  heard  approaching  in  the 
skies,  the  beating  of  the  wings  of  the  Angel  of  Peace. 
Now  he  has  descended  upon  our  poor,  bleeding,  war- 
torn  earth.  He  holds  in  his  hands  the  great  gifts  of 
Freedom  and  Victory.  We  greet  him  with  boundless 
gratitude  and  with  reverent  joy.  The  hideous  idol  of 
Prussian  militarism  lies  shattered  at  the  feet  of  the 
free  nations,  its  arch-priest  dethroned  and  disgraced, 
cast  out  by  his  own  distracted  people  and  branded  with 
the  curse  of  the  entire  world. 

To  this  blessed  and  glorious  result,  we  may  justly 
claim  that  America  has  contributed  no  mean  part.  We 
thank  God  for  the  day  when,  spurning  the  lure  of  ease 
and  plenty  and  boundless  prosperity,  we  chose  for  our 
own  that  road  to  the  heights  which  leads  through  sacri- 
fice and  suffering  and  brought  our  mighty  and  unspent 
power  to  the  rescue  of  the  hard  pressed  champions  of 
humanity. 

We  then  sought  no  advantage  for  ourselves  and  we 
seek  none  now.  We  have  proved  that  America  is  not 
the  "land  of  the  almighty  dollar,"  as  too  many  be- 
lieved and  as  especially  our  enemies  fatuously  believed 
to  their  undoing,  but  a  land  of  high  idealism,  ardently 


34-0  WAR  AND  FOREIGN  RELATIONS 

zealous  to  do  and  dare  and  spend  itself  in  a  righteous 
cause. 

We  look  back  over  these  past  fateful  nineteen 
months  and  we  examine  our  hearts  and  thoughts  and 
deeds  and  we  believe  we  may  say  justly  and  without 
self-complacency  that  the  men  and  women  of  America 
have  not  been  found  unworthy  under  the  great  test  to 
which  they  were  put.  Old  and  young,  rich  and  poor, 
East  and  West,  North  and  South — all  but  an  insig- 
nificant few  who  are  not  spiritually  Americans — have 
risen  to  the  inspiration  of  our  high  cause  and  have 
joined  in  patriotic  devotion  and  willing  sacrifice. 

A  new  and  exalted  spirit  pervades  the  land.  We 
have  made  a  new  pact  of  unity.  We  have  come  to 
understand  and  appreciate  each  other  better.  We  re- 
spect each  other  more.  We  are  justly  proud  of  the 
qualities  which  all  Americans  have  proved  themselves 
to  possess  in  common. 

We  draw  strengthened  faith  and  heightened  inspira- 
tion from  the  glorious  vindication  of  the  irresistible 
potency  of  the  American  spirit  which  has  made  its  own, 
transfused  and  merged  into  a  homogeneous  people, 
thinking  and  feeling  alike  in  national  essentials  the 
men  and  women  of  many  races  who  make  up  America. 

We  are  now  walking  along  the  heights  of  great 
achievements  and  lofty  aspirations.  Let  us  shun  the 
descent  into  the  valleys  we  have  left  behind.  Let  us 
trust  and  strive  that  some  at  least  of  the  things  we 
have  gained  spiritually,  may  never  leave  us. 

America  comes  out  of  the  war  with  her  economic  and 
moral  potency  and  prestige  vastly  enhanced,  with  her 


WHEN      THE      TIDE      TURNED  34I 

outlook  broadened,  her  field  of  activity  expanded,  her 
enterprise  quickened,  her  imagination  stirred,  her  every 
faculty  stimulated. 

The  vista  which  opens  before  us  of  America's  future 
is  one  of  dazzling  greatness,  spiritually  and  materially. 
The  realization  of  that  vision  cannot  fail  us  if  we  but 
meet  our  problems  in  a  spirit  of  true  Americanism,  of 
moderation  and  self-restraint  and  of  justice  and  good 
will  to  all,  rejecting  alike  privilege  and  demagogy,  ban- 
ishing all  class  rule,  be  it  of  capital  or  of  labor. 

In  that  spirit  let  us  grasp  each  other  by  the  hand  and 
thus  resolved  and  united  against  enemies  without  or 
foes  within,  let  us  march  on  toward  the  high  destiny 
that  Providence  has  allotted  to  the  country  which  in 
grateful  pride  and  deep  affection  we  call  our  own. 


I 


GREAT  BRITAIN 


T  is  one  of  the  characteristic  qualities  of  the  people 
of  Great  Britain  not  to  blow  their  own  horn.  Indeed, 
they  not  only  studiously  avoid  anything  in  the  nature 
of  self-advertising,  but  they  have  an  inveterate  reti- 
cence and  reserve,  frequently  mistaken  for  haughty 
self-complacency,  in  speaking  of  their  own  achieve- 
ments. They  are  given  to  understating  their  case. 
They  are  prone  to  grumble  rather  than  pat  themselves 
on  the  back.  They  have  a  distinct  aversion  to  the  lime- 
light. 

It  is  partly  due  to  these  national  traits  that  the  mag- 
nificent war  effort  of  Great  Britain  and  the  incalcu- 
lable value  of  its  results  to  the  Allied  cause  have  not 
perhaps  received  here  and  elsewhere  all  the  recognition 
and  admiration  to  which  they  are  entitled.  It  is  also 
due  in  part  to  a  persistent,  subtle  and  very  adroitly 
conducted  propaganda  on  the  part  of  Germany  and  of 
those  who  are  either  still  pro-German — strange  as  it 
may  seem  that  there  still  be  such  in  the  face  of  the  hide- 
ous crimes,  unatoned  for  and  unrepented,  of  Germany 
— or  who,  if  not  pro-German,  are  more  anti-English 
than  anti-German,  or  at  least  as  much  anti-English  as 
anti-German. 

That  propaganda  has  been,  from  the  beginning  of 

August,    1918:     Preface   to   "The   Common   Cause,"  issued   by  the 
Library  of  War  Literature. 

342 


GREAT      BRITAIN  343 

the  war,  and  is  now  at  work  to  belittle  the  British  war 
effort  and  war  achievement;  to  sow  in  the  Allied  coun- 
tries— particularly  America  and  France — the  seeds  of 
suspicion  and  dissension  in  respect  of  England;  to  try 
and  cause,  even  within  the  British  Empire  itself,  ill- 
feeling  and  division  by  circulating,  the  insidious  false- 
hood that  the  people  of  England  have  sacrificed,  fought 
and  suffered  less,  relatively,  than  those  of  Scotland  and 
Wales  and  the  colonies  and  dominions. 

No  one  can  read  the  facts  and  statistics  given  in  the 
booklet,  just  issued,  by  the  Library  of  War  Literature 
(bare  and  sober  and  unadorned  but  overwhelmingly 
eloquent),  without  being  completely  cured  of  any  lin- 
gering doubt  he  may  have  entertained  as  to  the  stu- 
pendous magnitude  and  the  vital  effectiveness  of  the 
effort  and  the  sacrifices  of  England  and  the  rest  of  the 
British  Empire. 

No  one  can  see  the  war  activities  of  Great  Britain, 
the  spirit  and  attitude  of  her  men  and  women,  the  life 
and  aspect  of  her  cities  and  countryside  under  war  con- 
ditions— as  I  have  had  occasion  to  observe  them  dur- 
ing a  recent  visit  to  Europe — without  being  most  pro- 
foundly impressed  with  the  immensity  and  supreme 
value  of  Great  Britain's  contribution  to  the  common 
cause,  with  the  loftiness  of  her  people's  spirit,  the  vast- 
ness  of  the  sacrifices,  simply,  bravely  and  uncomplain- 
ingly borne,  the  grim  and  solemn  determination  to 
"carry  on"  at  whatever  further  cost  till  the  sacred  end 
is  achieved. 

No  one,  not  blinded  by  violent  prejudice,  can  review 
the  facts  without  realizing  the  absolutely  vital  part 


344      WAR    AND    FOREIGN     RELATIONS 

which  Great  Britain  has  played  and  is  playing  in  the 
winning  of  the  war. 

She  spent  herself  without  stint  from  the  very  be- 
ginning. She  proved  her  mettle  from  the  very  mo- 
ment when,  rejecting  Germany's  base  and  clumsy  at- 
tempt to  bargain  for  British  honor  and  to  gain  Great 
Britain's  neutrality,  her  navy  took  a  stranglehold  upon 
the  enemy,  and  her  army,  with  lightning  swiftness, 
rushed  to  the  aid  of  the  hard  pressed  French.  It  was 
an  army  small  then  in  numbers,  but  magnificent  in 
spirit  and  fighting  capacity.  Incessantly  fighting 
against  overwhelming  odds,  it  helped  greatly  to  make 
possible  the  miracle  of  the  first  Battle  of  the  Marne. 
And  a  little  later  on,  the  appallingly  reduced  rem- 
nants of  that  glorious  army,  together  with  such  small 
reinforcements  from  England  as  were  then  available, 
set  themselves,  a  thin  line  of  heroes,  against  the  onrush 
of  the  Germans  at  Ypres,  and  in  a  series  of  fierce  bat- 
tles, no  less  miraculous  in  their  outcome  and  no  less 
determining  in  their  consequences  than  the  Battle  of 
the  Marne,  defeated  the  efforts  of  the  enemy  numer- 
ically much  superior  and  far  better  armed,  to  reach  the 
Channel  ports. 

Through  the  darkest  hours  the  indomitable  spirit  and 
dauntless  courage  of  Great  Britain  never  faltered.  At 
every  front  throughout  the  world,  upon  the  seven  seas, 
and  at  the  "home  front,"  the  great  qualities  of  the  race 
stood  forth  in  great  deeds  and  achievements.  She  ac- 
complished veritable  marvels  of  organization,  rising 
with  splendid  resourcefulness  to  the  call  of  every  emer- 
gency, from  the  early  stages  of  improvising  means  to 


GREAT      BRITAIN  345 

match  the  tremendous  war  equipment  of  the  enemy,  ac- 
cumulated in  many  years  of  sinister  preparation,  to  this 
day  when,  in  the  midst  of  all  her  other  efforts,  bur- 
dens and  occupations,  she  managed  to  provide  at  the 
cost  of  serious  privation  to  herself,  much  the  larger 
part  of  the  ships  and  of  the  protection  for  transporting 
our  army  to  France. 

Great  Britain  has  supremely  met  a  supreme  test. 
With  all  the  sublime  heroism  of  France,  with  all  the 
splendid  valor  of  Belgium,  Italy,  Servia — what  would 
have  befallen  the  cause  of  right  and  humanity  if  Great 
Britain  had  failed  it? 

Thank  God,  that  cause  is  safe.  Absolute  and  com- 
plete victory  has  now,  happily,  become  assured  beyond 
doubt.  To  gather  and  make  permanent  the  fruits  of 
that  victory  for  the  welfare  of  the  world,  nothing  is 
more  essential  than  for  Great  Britain  and  America  to 
stand  together,  in  cordial  sympathy,  unshakable  trust 
and  full  understanding. 

They  stand  together  now,  comrades  in  arms.  The 
stress  of  a  common  danger,  the  defense  of  common 
ideals  has  brought  them  together.  It  is  an  event  filled 
with  happy  augury  for  both  nations  and,  indeed,  for 
all  nations  that  love  peace  and  liberty  and  justice. 

May  it  come  to  pass,  that  the  seed  sown  in  the  storm 
of  war  shall  bring  forth  a  tree  of  unity  and  concord 
between  the  English  and  American  peoples,  which  shall 
grow  and  stand  deep-rooted  for  all  time ! 


AN  OPEN  LETTER 

"No;  'tis  slander!" 

— Shakespeare:   Cymbeline. 

HE  recent  outgiving  of  a  newspaper  correspond- 
ent upon  his  return  from  Europe  is  infinitely  regret- 
table. It  would  be  so  even  if  it  correctly  represented 
the  situation.  But  it  does  not.  It  does  contain  cer- 
tain facts.  These  facts  are  not  new  to  fairly  well- 
informed  people,  nor  is  their  publication  capable  of 
doing  any  particular  harm,  however  questionable  it  may 
be  in  taste.  The  objectionable  and  pernicious  part  of 
the  statement  is  not  in  its  recital  of  facts,  but  in  the 
setting  forth  of  the  correspondent's  own  deductions 
and  in  his  reproduction  of  mischievous  gossip. 

My  justification  for  taking  part  in  the  public  dis- 
cussion aroused  by  the  statement  rests  on  the  circum- 
stance that  I  was  in  Europe  during  a  considerable  part 
of  the  period  to  which  the  correspondent  refers,  and 
that  I  had  occasion  to  see  leading  members  of  the  Brit- 
ish and  French  Cabinets,  our  own  foremost  representa- 
tives, from  General  Pershing  down,  and  editors  of  sev- 
eral of  the  most  influential  organs  of  public  opinion  in 
England  and  France. 

From  the  facts  as  I  had  opportunity  to  ascertain 
them  and  not  from  hearsay,  I  know  that  the  attitude 

December,  1918. 

346 


AN     OPEN      LETTER  347 

of  the  governing  circles  in  these  countries  was  and  is 
one  of  the  utmost  good-will  and  the  most  generous 
recognition  toward  America,  and  of  the  sincerest  seek- 
ing for  lasting  and  cordial  friendship.  I  know  of  my 
own  knowledge  that,  more  than  once,  requests  from 
the  representatives  of  America  were  complied  with,  al- 
though such  requests  did  not  accord  with  the  views 
of  the  British  and  French  authorities  and  at  times 
were  far  from  easy  to  meet — and  they  were  complied 
with  solely  from  a  warm-hearted  desire  to  accede  to 
anything  within  the  limits  of  the  practicable  that 
America  might  ask. 

I  have  never  seen  or  heard  of  any  more  touching 
and  unanimous  manifestation  on  the  part  of  the  peo- 
ple of  one  nation  toward  those  of  another  nation  than 
the  solicitous  eagerness  on  the  part  of  everybody,  high 
or  low,  in  England  and  France,  to  make  our  boys  wel- 
come and  to  minister  to  their  well-being  and  comfort. 
And  the  universal  praise  and  admiration  bestowed  on 
our  soldiers  for  their  appearance,  conduct  and  valor 
were  in  striking  contrast  to  the  reticence  of  the  English 
and  French  in  speaking  of  the  sacrifices  they  had 
brought  and  were  bringing,  the  privations  they  had  en- 
dured and  were  enduring,  and  the  superb  heroism  of 
their  own  defenders. 


If  anything  can  be  more  regrettable  than  the  cor- 
respondent's remarks  concerning  England  and  France, 
and  the  alleged  frame  of  mind  of  their  Governments 
and  people  concerning  America,  it  is  what  he  says  about 
Italy. 


34^  WAR  AND  FOREIGN  RELATIONS 

What  it  meant  to  the  Allied  cause  to  have  Italy  on 
its  side  can  best  be  appreciated  if  we  picture  to  our- 
selves what  would  have  been  the  situation  if  Italy  had 
sided  with  the  Central  Powers,  or  even  if  she  had 
merely  been  benevolently  neutral  toward  those  powers. 

The  assured  neutrality  of  Italy  in  the  beginning  of 
the  war  was  of  the  utmost  value  to  the  Allies  in  that 
it  enabled  France  to  denude  its  southern  frontier  of 
troops  and  throw  its  entire  available  man-power  against 
the  German  invader. 

And  the  entrance  of  Italy  into  the  war  on  the  side 
of  the  Allies  was  one  of  the  vital  elements  of  ultimate 
victory. 

Italy  might  have  stood  aside  from  the  great  con- 
flict, and,  without  firing  a  shot,  by  bargaining  and 
maneuvering  could  have  managed  to  obtain,  in  the 
way  of  territorial  satisfaction,  much  the  greater  part 
of  what  she  could  hope  for  as  the  result  of  a  victori- 
ous war.  She  rejected  that  inglorious  role.  Overrul- 
ing a  hesitant  Ministry,  her  people  aflame  with  a  fine 
passion  for  freedom  and  right,  chose  the  road  of  dar- 
ing and  of  sacrifice.  They  chose  to  throw  Italy's 
sword  into  the  scale  on  the  side  of  the  cause  of  jus- 
tice and  humanity.  They  did  so  not  when  the  star  of 
the  Allies  was  in  the  ascendant,  but,  on  the  contrary, 
when  it  was  darkened  by  heavy  and  menacing  clouds. 
The  armies  of  Russia  had  just  suffered  disastrous  de- 
feat, and  if  it  had  not  been  for  Italy's  coming  into  the 
war  just  at  that  juncture,  a  large  part  of  the  forces  of 
the  Central  Powers  would  have  been  released,  to  be 


AN     OPEN      LETTER  349 

thrown  upon  the  Western  front  against  the  British  and 
French  lines. 

Insufficiently  equipped  and  provided,  Italy  fought 
valorously  against  the  most  formidable  difficulties  and 
a  foe  immensely  favored  by  natural  positions,  while 
her  people  suffered  untold  hardships  through  lack  of 
fuel  and  food.  After  the  disaster  of  Caporetto,  due  to 
causes  for  which  but  partial  responsibility  attaches  to 
her,  she  accomplished  the  astounding  feat  of  stopping 
the  invader  at  the  very  floodtide  of  his  onset.  Far  from 
giving  way  to  depression  and  discouragement  in  the 
face  of  gravest  danger,  she  steeled  herself  to  redoubled 
effort.  With  stout-hearted  determination,  she  held  on 
to  her  precarious  position  at  the  Piave;  she  beat  off  the 
renewed  attack  of  the  numerically  superior  Austrian 
army  last  summer,  and  finally  defeated  it  utterly,  de- 
stroying the  military  power  of  Austria  and  forcing  that 
Empire  to  beg  for  peace  and  to  relinquish  armed  re- 
sistance a  week  before  Germany  laid  down  her  arms. 

Though  hard  pressed  herself,  she  sent  a  contingent 
of  her  soldiers  to  fight  at  the  French  front  during  the 
critical  period  of  last  spring  and  summer,  and  the  rec- 
ord of  that  contingent  is  one  of  admirable  bravery. 


Italy  has  indeed  merited  the  gratitude,  respect,  and 
good-will  of  the  Allied  nations  and  America,  and  the 
fullest  consideration  for  her  national  sentiments  and 
aspirations.  In  view  of  what  the  Italian  people  has 
done,  dared,  and  suffered  for  our  common  cause,  it  is 
more  than  deplorable  that  any  American  in  a  responsi- 
ble position  should  make  himself  the  medium  for  pub- 


350     WAR    AND    FOREIGN     RELATIONS 

lishing  insults  against  that  great  nation,  such  as  are 
contained  in  the  statement  under  discussion. 

And,  without  the  slightest  wish  to  revive  old  con- 
troversies, may  I  add  this:  For  three  terrible  years 
the  Allied  nations  fought  and  bled  and  suffered  before 
America  came  to  realize  that  their  fight  was  our  fight 
and  that  our  place  was  by  their  side.  During  those 
years  we  drew  enormous  wealth  from  their  resources, 
depleted  in  the  struggle  for  a  sacred  cause.  Some 
memories,  none  too  pleasant  to  recall,  attach  to  certain 
pronouncements  from  the  highest  American  quarter  and 
to  certain  aspects  of  our  official  attitude  in  that  fateful 
period. 

We  entered  the  war  very,  very  late,  almost  too  late. 
Since  entering  it,  America  has  conducted  herself  in  a 
manner,  at  home  and  in  the  field,  which  measures  up 
to  the  full  greatness  of  her  traditions,  which  gives  us 
just  cause  for  pride  and  which  has  gained  for  us  a  posi- 
tion of  high  honor,  prestige  and  potency  among  the 
nations  of  the  world.  But  does  it  not  behoove  us, 
and  especially  those  of  us  whose  words  find  their  way 
into  print,  to  look  back  from  time  to  time  to  those  thir- 
ty-two long  months  which  preceded  the  sixth  of  April, 
1917,  and  should  not  that  retrospect  cause  us  to  put  a 
due  measure  of  restraint  upon  our  judgments,  claims 
and  utterances? 


A  GOLDEN  BOOK  OF  SOLDIERS' 
LETTERS 

T 

A  HE  book  of  American  glory  contains  no  nobler 
pages  than  those  which  record  the  superb  heroism  of 
our  fighting  men  in  the  war  now  so  happily  concluded, 
and  the  passion  of  patriotic  devotion  which  everywhere 
exalted  the  men  and  women  of  many  races  who  make 
up  America. 

We  have  seen  humanity  at  its  highest  and  greatest. 
We  may  not  indulge  the  hope  that  we  shall  be  able 
permanently  to  maintain  ourselves  at  the  level  of 
thought,  feeling  and  action  to  which  we  were  lifted  by 
the  force  of  a  lofty  inspiration.  But  we  do  earnestly 
hope,  and  surely  we  shall  not  fail  to  strive,  that  some, 
at  least,  of  the  things  the  Nation  has  gained  spiritually 
will  remain  as  enduring  attainments.  And  we  trust  we 
shall  find,  many  of  us,  as  these  solemn  years  recede,  that 
in  our  individual  souls  we  have  stored  up  assets  which 
will  remain  permanent  possessions. 

I  have  had  occasion  to  read  numerous  letters  writ- 
ten by  officers  and  men  of  our  Army  from  their  canton- 
ments here  and  abroad,  from  the  steamers  which  car- 
ried them  to  Europe,  from  hospitals  and  from  the  firing 
lines.     These  letters  bear  the  stamp  and  impress  of  a 


Remarks   at  the   Annual   Dinner  of  the  Rutgers  Alumni   Associa- 
tion, New  York,  January  17,  1919. 

351 


352      WAR    AND    FOREIGN    RELATIONS 

great  time.  They  are  touched  with  a  great  spirit. 
Some  of  them  in  their  sentiment,  their  views,  and  their 
expressions  are  of  exalted  and  touching  beauty. 

The  boys  who  wrote  them  were  on  their  way  to  look 
Death  in  the  face  or  had  just  come  from  encountering 
him  without  flinching.  They  saw  things  differently 
from  what  they  had  ever  seen  them  before  or  will  ever 
see  them  again.  All  the  pettinesses,  the  make-believes, 
the  conventionalities  of  existence,  had  fallen  away. 
They  recognized  true  meanings,  true  values  and  true 
proportions.  Things  were  revealed  to  them.  They 
struck  depths,  they  found  words,  they  rose  to  heights 
which  were  not  accessible  to  them  before,  and  probably 
will  not  be  accessible  to  them  again. 

These  letters  are  not  only  in  the  true  sense  of  the 
term  human  documents,  of  the  rarest  value,  but  ema- 
nating as  they  do  from  writers  of  the  widest  diversity 
of  birth,  upbringing,  occupation  and  race,  they  are  a 
supreme  demonstration  of  the  workings  of  the  crucible 
which  is  America,  and  of  the  irresistibly  compelling 
power  of  its  appeal  and  spirit,  upon  those  who  are 
brought  within  its  orbit.  They  are  proof  conclusive  of 
the  theory  of  America ;  they  are  both  assurance  and  ad- 
monition for  the  future. 

They  are  spontaneous  and  moving  manifestations  of 
the  noble  qualities  latent  in  American  youth — unknown 
too  often,  stifled,  or  denied  expression  in  the  ordinary 
routine  of  life,  but  leaping  forth  eagerly  in  response  to 
a  great  call.  They  ought  to  be  made  known  and  ac- 
cessible as  widely  as  possible  in  a  form  which  shall 
make   them  permanent  national   possessions,   so  that 


soldiers'    letters  353 

their  spirit  may  speak  forever  to  the  American  people. 

I  should  like,  therefore,  to  throw  out  the  suggestion 
whether  a  scheme  roughly  on  the  following  lines  might 
not  be  found  practicable : 

A  National  Committee  to  be  constituted,  composed 
of  a  small  number  of  distinguished  and  eminently 
qualified  men.  This  Committee  would  invite  those  who 
have  received  soldiers'  letters  which  they  believe  to  be 
noteworthy  in  the  sense  I  have  tried  to  indicate,  to  send 
such  letters  or  copies  of  them  to  sub-committees  desig- 
nated for  each  State. 

A  selection  would  then  be  made,  of  say  five  hundred 
letters,  and  these  would  be  published  in  a  volume,  the 
proceeds  from  the  sale  of  which,  would  go  to  some  suit- 
able purpose  commemorative  of  the  war.  (Or,  instead 
of  one  national  committee,  it  might  be  found  appropri- 
ate to  have  the  Governor  of  each  State  appoint  a  com- 
mittee and  have  each  State  publish  a  volume  of  letters 
from  its  sons.) 

Such  a  volume — a  "golden  book"  in  truth — would 
be  a  fitting  memorial  for  our  noble  dead,  and  an  in- 
spiration and  a  solemn  admonition  for  those  now  living 
and  for  generations  who  will  come  after  them. 


AMERICA  AND   THE   LEAGUE  OF 
NATIONS 


A    LETTER 

New  York 
November  29,  1919 

The  information  which  has  come  to  you  as  to  my 
views  and  attitude  concerning  the  League  of  Nations 
Covenant  is  quite  correct. 

I  am,  of  course,  cordially  in  favor  of  any  wise  and 
fitting  pact  to  preserve  the  peace  of  the  world.  I  am 
in  favor  of  America  taking  her  full  share  in  the  bur- 
den of  that  responsibility  which  rightfully  goes  with 
power. 

I  am  in  favor  of  dealing  with  those  nations  by  whose 
side  we  fought  in  the  war,  not  merely  according  to  the 
measure  of  our  duty,  but  according  to  the  measure  of 
our  good-will  and  of  our  grateful  appreciation  of  their 
heroism  and  their  sacrifices  in  the  struggle  to  save  the 
world  from  Prussianism. 

I  am  in  favor  of  the  proposed  defense  treaty  with 
our  sister-republic  and  ancient  ally,  France  (excepting 
the  provision  which  makes  its  duration  subject  to  the 
judgment  of  the  League  of  Nations). 

I  am  in  favor  of  the  most  cordial  understanding  and 


A   letter  to  Senator  Miles  Poindexter,  Washington. 

354 


AMERICA    AND    LEAGUE    OF    NATIONS      355 

co-operation  with  Great  Britain.  Indeed,  I  believe 
that  no  other  single  element  is  so  vital  to  the  peace, 
safety  and  freedom  of  the  world  as  close,  harmonious 
and  mutually  trustful  relationship  between  America 
and  that  great  democratic  Empire. 

I  am  in  favor  of  doing  everything  incumbent  upon 
us  to  make  secure  and  to  perpetuate  that  which  we  and 
the  Allied  nations  fought  for. 

But  I  am  strongly  opposed  to  the  League  of  Nations 
Covenant  as  originally  submitted  to  the  Senate.  In- 
deed, I  disbelieve  in  the  whole  conception  on  which  it 
rests.  I  have  but  scant  faith  in  the  practical  useful- 
ness and  potency  of  what  a  French  writer  has  termed 
"a  chimerical  edifice  conceived  in  disdain  of  history 
and  reality  and  human  nature." 

America  loves  peace.  The  ideal  of  a  union  to  bring 
about  the  reign  of  righteousness  among  the  nations, 
appeals  strongly  to  popular  sentiment.  The  American 
people  were  and  are  more  than  willing  to  take  their 
part  in  achieving  that  high  task.  When  the  Covenant 
was  first  presented  to  the  people  here  and  before  its 
obligations,  commitments  and  effect  were  fully  under- 
stood by  them,  there  was  a  decided  and  very  natural 
popular  current  in  favor  of  its  prompt  ratification. 

Those  Senators,  Republicans  and  Democrats,  who, 
like  you,  stood  out  at  that  time  against  the  current  and 
took  upon  themselves  the  ungrateful  and  wearing  task 
of  pitting  sober  truth  against  glittering  rhetoric  and 
sentimental  impulse,  of  analyzing,  explaining  and  ex- 
horting, have  rendered  a  patriotic  service,  the  value 


356     WAR    AND    FOREIGN     RELATIONS 

and  meaning  of  which  will,  I  am  convinced,  be  recog- 
nized and  appreciated  more  and  more  as  time  goes  by. 

So  far  from  playing  politics,  they  staked  their  po- 
litical future  upon  their  convictions.  Treat  pressure 
and  powerful  influence  were  brought  to  bear  upon  them 
to  cause  them  to  modify  their  attitude.  They  were 
exposed  to  vituperation,  misinterpretation  of  their  mo- 
tives, and  to  the  taunt  of  Pro-Germanism.  As  against 
the  potent  instrumentalities  available  to  the  other  side 
in  order  to  reach  and  form  public  opinion,  and  against 
amply  sustained  propaganda,  they  found  themselves 
without  organized  support. 

But  they  stood  their  ground;  and  now  a  majority  of 
their  colleagues,  and  also,  I  feel  sure,  of  the  people, 
have  come  to  insist  with  them  upon  an  "irreducible 
minimum"  of  reservations  before  the  Peace  Treaty  is 
ratified  by  this  country. 

America,  in  the  late  war,  fought  for  peace,  honor, 
safety,  liberty  and  right. 

Nothing  that  we  fought  for  makes  it  incumbent  upon 
us  to  entangle  ourselves  in  the  age-long  racial  squabbles 
and  intrigues  of  Europe  and  Asia,  or  to  become  the 
guardians  and  guarantors  of  an  arbitrarily  and  arti- 
ficially remodeled  world,  put  together  in  disregard, 
more  or  less,  of  the  evolution  of  centuries  and  of  the 
proven  qualities  and  characteristics  of  races,  according 
to  the  perceptions,  predilections  and  compromises  of  a 
few  men  assembled  in  secret  conclave,  far  removed  from 
the  informing  and  vitalizing  currents  of  public  opin- 
ion and  not,  perhaps,  quite  sufficiently  removed  always 


AMERICA    AND    LEAGUE    OF    NATIONS      357 

from  considerations  of  domestic-political  expediency.* 
Nothing  that  we  fought  for  makes  it  incumbent  upon 
us  to  relinquish  our  fundamental  national  policies  and 
traditions,  and  to  transform  the  American  eagle  into 
an  international  nondescript. 

We  helped  mightily  to  win  the  war.  Alone  among 
the  victors,  we  have  asked  for  none  of  the  spoils 
(though,  it  seems  to  me,  at  least  we  might  well  and 
justly  have  claimed  a  share  in  the  distribution  of  those 
islands  in  the  Pacific  formerly  owned  by  Germany, 
which  are  of  strategic  importance  to  America).  We 
are  not  called  upon  to  set  America's  signature  to  an  in- 
strument that  would  leave  us  poorer  in  those  intangi- 
ble national  assets  which  we  have  jealously  guarded 
heretofore  and  which  we  rightly  prize. 

America,  the  young  giant  of  the  free  and  unconven- 
tional West,  cannot  be  put  into  a  garment  cut  accord- 
ing to  the  manner  and  habits  of  old-time  European 
diplomacy.  She  is  not  at  her  best  when  sitting  around 
green  tables  in  European  chancelleries.  She  is  not 
fitted  by  tradition,  training,  governmental  methods,  in- 
terest or  inclination  to  take  a  continuous  and  responsi- 


*  A  distinguished  English  Liberal  whose  name,  were  I  at  liberty  to 
disclose  it,  would  carry  great  weight,  has  expressed  himself  as  fol- 
lows in  a  letter  which  came  to  my  knowledge  recently: 

"What  I  want  every  one  over  here  to  bear  in  mind  is  that  the 
Peace  Treaty  asked  the  United  States  by  a  'coup  de  main'  to  reverse 
the  whole  policy  of  its  history.  .  .  . 

"The  whole  Peace  Treaty  is  based  upon  false  ideas.  .  .  . 

"If  you  are  to  ask  the  world  to  guarantee  the  world's  peace  it  is 
essential  to  begin  by  establishing  a  foundation  on  which  peace  can 
stand.  This  Treaty  has  done  the  exact  opposite.  It  has  established 
conditions  full  of  menace  for  the  future  and  it  asks  the  League  of 
Nations  to  guarantee  that  they  shall  continue.    It  is  asking  too  much." 


358     WAR    AND    FOREIGN     RELATIONS 

ble  part  in  the  adjustment  of  the  intricacies  of  Euro- 
pean affairs. 

She  will  do  far  more  and  far  better  work  for  the 
world  if  she  is  left  free  to  do  it  in  her  own  way  than 
if  she  is  confined  and  constrained  by  the  rigid  formulae 
and  meticulous  provisions  of  an  instrument  such  as  the 
one  framed  at  Versailles. 

We  shall  be  expected  by  our  associates  in  the  League 
to  do  things,  some  of  which  we  know  beforehand  we 
shall  not  be  able  to  do  adequately  or  shall  not  see  our 
way  to  do  at  all  unless  they  are  supported  by  public 
opinion  in  this  country  when  the  emergency  arises. 

We  shall  be  expected  to  take  or  participate  in  deci- 
sions and  actions  which,  in  many  cases,  will  be  likely 
to  find  repercussions  in  our  domestic  politics  with  conse- 
quences easily  to  be  foreseen.  Whether  our  represen- 
tatives on  the  Council  of  the  League  would  always  be 
selected  according  to  fitness  and  experience,  or  whether 
at  times  their  qualifications  would  be  mainly  that  of 
being  "deserving"  partymen,  is  at  least  open  to  ques- 
tion. 

I  fear  that  our  participation  in  the  League  as  now 
constituted,  with  its  inelasticity  and  cumbersome  ma- 
chinery, its  infinite  complexity  and  all-embracing  scope, 
instead  of  promoting  harmony  and  good-will,  would 
be  apt  rather  to  breed  misunderstandings,  irritation  and 
ill-feeling  between  European  nations  and  ourselves. 

Already,  in  our  recent  excursion  into  the  field  of 
European  politics,  we  have  managed  in  one  short  year 
to  convert  friendship  and  trust  toward  us  into  estrange- 
ment, disappointment  and  acrimony,  in  the  case  of  too 


AMERICA    AND    LEAGUE    OF    NATIONS      359 

many  of  those  nations  with  whom  we  were  associated 
in  the  war. 

I  have  been  at  pains  to  read  through  the  Peace 
Treaty,  including  the  Covenant,  from  beginning  to 
end.     I  laid  it  away  sore  at  heart  and  sickened. 

The  Treaty  falls  grievously,  most  grievously  short 
of  realizing  the  high  hopes  of  the  world  for  a  peace 
worthy  of  the  spirit  and  aspirations  which  animated 
the  Allies  and  America  during  the  war  and  at  the  con- 
clusion of  the  armistice.  It  falls  short,  in  spirit  and  in 
letter,  of  realizing  declarations  solemnly  made  and  even 
of  abiding  by  pledges  formally  given. 

We  are  told  by  its  defenders  that  the  Covenant  is 
admittedly  far  from  perfect  and  that  the  Treaty  of 
Peace  itself  is  faulty  and  open  to  serious  objection  in 
certain  respects,  but  that  these  shortcomings  can  and 
will  be  corrected  and  improved  when  the  League  comes 
into  operation.  What  reason  is  there  to  put  faith  in 
that  promise — being  given  the  fact  that  no  important 
change  can  be  made  without  the  unanimous  consent  of 
the  Council  of  the  League*?  In  what  instance  in  the 
record  of  European  diplomacy  was  there  ever  unanim- 
ity when  selfish  interests  were  at  stake,  except  una- 
nimity purchased  by  equally  selfish  compromises  and 
bargainings'?  Does  the  present  state  of  Europe  under 
the  dispensation,  for  the  past  twelve  months,  of  the 
Supreme  Council  composed  of  the  leading  nations,  in- 
cluding America,  encourage  faith  in  the  effective  and 
beneficent  workings  of  international  unanimity*? 

I  had  hoped  (and  some  of  those  more  competent 
than  I  in  international  affairs  shared  that  hope)  that  in 


360     WAR    AND    FOREIGN     RELATIONS 

place  of  creating  a  wholly  novel  and  untried  machinery 
of  vast  complexity,  the  United  States,  England,  France 
and  Italy  would  make  a  short,  simple,  solemn  declara- 
tion to  the  world  to  the  effect  that  the  high  and  benefi- 
cent things  we  fought  for,  we  mean  to  preserve  and 
protect  and  that  any  one  who  assails  them  will  find 
these  great  European  powers  and  America  again  ar- 
rayed for  the  defense  of  liberty,  peace  and  right. 

Such  a  declaration  would  have  meant  neither  an  alli- 
ance with  or  against  anybody,  nor  a  threat  toward  any 
other  nation.  Such  a  declaration,  together  with  the 
utilization,  strengthening  and  development  of  the  ex- 
isting machinery  of  The  Hague  Conferences  and  Tri- 
bunal, would,  I  believe,  accomplish  all  that  we  are 
called  upon  to  do  in  this  respect,  and  accomplish  it 
more  effectively  than  an  iron-clad  document. 

America  wants  peace,  not  only  actually  but  also  for- 
mally, with  her  late  enemies.  We  should — and  but 
for  the  League  Covenant  complication  would — have 
had  it  long  ago.  If,  contrary  to  expectation,  develop- 
ments were  to  make  it  necessary  for  America  to  act 
alone  and  upon  her  own  initiative,  she  could  have  peace 
for  the  asking  and  without  jeopardizing  any  advan- 
tage that  may  accrue  to  us  under  the  Versailles  Treaty, 
because  the  Central  Powers  need  peace  far  more  ur- 
gently than  we  do.  There  would  be  no  "hat  in  hand" 
business  about  it  on  our  part,  as  some  would  have  us 
believe,  nor  would  such  a  step  involve  a  modification 
of  the  peace  conditions  as  fixed  between  the  Allied 
Powers  and  Germany.  Nor  would  it  mean  a  forsaking 
by  us  of  the  Allied  nations,  especially  if  accompanied 


AMERICA    AND    LEAGUE    OF    NATIONS       361 

by  the  ratification  of  the  defense  treaty  with  France, 
which,  I  hope  and  believe,  will  be  ratified  (with  the 
modification  aforementioned)  as  soon  as  the  President 
elects  to  submit  it  to  the  Senate. 

However,  it  is  to  be  hoped  and  expected  that  the  ne- 
cessity for  our  concluding  a  separate  peace  with  Ger- 
many will  not  be  permitted  to  arise.  Unless  prevented 
by  unyielding  obstinacy  and  pride  of  opinion  in  high 
places,  it  may  be  presumed  that  the  Versailles  Peace 
Treaty,  including  the  Covenant,  will  be  ratified  in  the 
course  of  the  next  session  of  Congress,  subject  to  the  ir- 
reducible minimum  of  reservations.  Being  given  the 
sinister  circumstances  and  the  world  situation,  which, 
unfortunately,  and  unnecessarily,  have  been  created 
through  the  course  of  action  of  the  Peace  Conference,  I 
am  forced  to  recognize,  however  reluctantly  and  with- 
out modifying  the  views  above  expressed,  that  ratifica- 
tion, subject,  of  course,  to  such  reservations,  would  ap- 
pear the  course  that  is  called  for  and  that  should  be 
adopted. 

Whether  or  not  that  course  be  approved  by  the  nec- 
essary two-thirds  majority  of  the  Senate,  I  am  quite 
certain  that  the  Senate's  attitude  in  respect  of  the 
League  of  Nations  Covenant  does  not  signify  any  lack 
of  good-will  or  appreciation  toward  the  Allied  nations, 
or  a  callous  disregard  of  our  duty  toward  a  world  in 
sore  distress. 

And  the  very  first  thing  we  ought  to  do  as  an  ex- 
pression of  our  true  sentiment  and  in  fulfilment  of  that 
duty,  and  out  of  due  regard  for  our  moral  standing  in 
the  world,  is  to  make  available,  in  a  suitable  way  and 


362      WAR    AND     FOREIGN     RELATIONS 

to  a  duly  measured  extent,  to  the  Allied  nations  and, 
next  to  them,  to  the  people  of  the  Central  Powers  and 
the  newly  created  nations,  those  credits  which  are  re- 
quired to  enable  them  to  obtain  urgently,  indeed  vi- 
tally, needed  foodstuffs  and  raw  materials  and  to  start 
resuming  normal  economic  life.  The  often  heard  con- 
tention that  we  cannot  act  adequately  until  the  Treaty 
is  ratified  by  the  Senate,  is  by  no  means  conclusive. 
Indeed,  it  has  but  little  validity.  We  can  and  should 
act  now. 

In  advocating  the  inclusion  of  our  late  enemies 
among  those  to  whom  we  should  extend  that  succor 
which  we  alone  among  the  nations  are  able  to  give,  I 
am  aware  that  I  may  be  exposing  myself  to  the  taunt 
of  Pro-Germanism.  I  am  no  more  afraid  now  of  the 
epithet  "Pro-German"  than  I  was  afraid  of  the  epithet 
"Renegade"  formerly,  because  of  the  stand  I  took 
against  the  dreadful  wrong  of  Prussianized  Germany 
from  the  day  the  first  gun  was  fired  in  the  summer  of 
1914.  I  do  not  seek  the  nod  of  approbation  of  those 
who  try  to  make  up  and  seek  forgetfulness  for  their 
attitude  before,  and  in  some  cases  even  after  America 
entered  the  war,  by  loud  professions  of  unrelenting  hos- 
tility and  ostentatious  hatred  toward  the  beaten  foe. 

Germany  is  crushed.  Her  spirit  is  broken.  Stu- 
pendous as  was  her  pride,  has  been  her  fall.  Many  of 
her  people  are  in  dire  distress.  A  peace  of  stern  and 
sweeping  punishment,  with  an  as  yet  indeterminate  sen- 
tence of  reparation,  has  been  imposed  on  her.  Cur- 
tailed in  land,  population  and  the  means  of  sustenance 


AMERICA    AND    LEAGUE    OF    NATIONS      363 

and  trade,  impoverished,  faced  with  staggering  bur- 
dens, she  stands  in  utter  gloom  and  dismay. 

More  and  more  the  recognition  of  the  monstrous 
crime  to  which,  under  thrice  accursed  leadership,  her 
people  lent  themselves,  is  being  borne  in  upon  them, 
even  though  I  fear  that  some  time  must  still  elapse  be- 
fore a  full  consciousness  of  their  guilt  and  a  genuine 
mood  of  atonement  will  supplant  the  state  of  dazed  be- 
wilderment and  bitterness  of  spirit,  in  which  Germany's 
utter  defeat  and  the  unsparing  penalties  assessed  against 
her  have  left  the  nation. 

The  unspeakable  outrage  which  the  German  rulers 
and  people  have  committed  upon  the  world  will  stand 
forever  among  the  most  horrible  national  malefactions 
of  history.  It  can  never  be  condoned  nor  forgotten. 
But  neither  should  mercy  and  humanity  be  forgotten. 
Nor  should  this  be  forgotten : 

Here  is  a  people,  still  sixty  millions  strong,  springing 
from  one  of  the  great  racial  stocks  of  the  earth,  intelli- 
gent and  efficient,  naturally  given  to  good  order  and 
to  hard  work,  having  in  past  times  contributed  much 
to  the  common  assets,  spiritual  and  material,  of  the 
world. 

To  the  east  of  them  the  red  flood  of  Bolshevism  is 
threatening  to  engulf  the  nations. 

Whether  those  sixty  millions  shall  be  made  useful 
in  re-equipping  and  normalizing  a  world  sadly  out  of 
gear  and  sorely  beset  by  insufficient  production  and  in- 
sufficient means  of  distribution;  whether  they  shall 
be  given  scope  and  inducement  for  work  and  rehabilita- 
tion and  the  preservation  of  the  existing  order  of  civi- 


364     WAR    AND    FOREIGN     RELATIONS 

lization  and  government;  or  whether,  bereft  of  hope, 
listening  to  the  councils  of  despair,  they  shall  surren- 
der to  those  who  promise  them  salvation  through  world 
chaos,  depends  primarily  upon  the  actions  and  the  at- 
titude toward  Germany,  of  America  and  her  Allies  in 
the  late  war. 

There  is  no  time  to  be  lost.  The  people  of  Germany 
are  looking  to  the  coming  winter  with  dismal  forebod- 
ings.    It  may  be  decisive  for  good  or  ill. 

Twelve  months  after  the  end  of  the  war,  a  very 
large  portion  of  Europe  is  still  in  the  throes  of  utter 
confusion,  drifting  in  helpless  and  aimless  turmoil. 
The  responsibility  for  this  deplorable  situation  rests  in 
no  way  with  the  American  Senate.  It  lies  primarily  at 
the  door  of  those  accountable  for  the  faultiness  of  the 
Peace  Treaty,  and  particularly  for  not  having  foreseen, 
or  at  least  not  having  devised  measures  to  meet  the 
economic  and  financial  developments  which  were 
bound,  inevitably,  to  arise  in  the  first  stage  of  the  post- 
bellum  period  during  the  carrying  out  of  the  terms  of 
the  Treaty.  Such  measures,  if  planned  and  carried  out 
at  the  proper  time,  would  have  presented  no  formi- 
dable difficulty  and  would  have  spared  the  world  much 
tribulation,  distress  and  peril. 

It  has  now  been  demonstrated  unmistakably  and 
quite  irrespective  of  the  Treaty  situation  that  private 
enterprise  in  America  cannot  by  itself  accomplish  the 
task  of  providing  the  means  for  Europe's  immediate 
necessities,  or,  at  any  rate,  that  it  cannot  accomplish 
that  task  as  quickly  as  needed — for  various  reasons, 
among  the  principal  ones  of  which  is  the  fact  that  crude 


AMERICA    AND    LEAGUE    OF    NATIONS       365 

and  shortsighted  taxation  has  crippled  the  American 
investment  market  for  the  time  being  and  largely  barred 
access  to  the  great  reservoir  of  private  capital.  In  view 
of  this  circumstance  it  has  become  the  function  of  our 
Government  to  take  the  lead  and  to  act  promptly  and 
effectively,  not,  be  it  understood,  in  the  way  of  direct 
loans  to  foreign  Governments  or  of  relieving  banks, 
exporters,  etc.,  of  their  due  share  of  exertion  and  bur- 
den, but  in  the  way  of  facilitating,  supporting  and  sup- 
plementing such  efforts  by  appropriate  means  and  agen- 
cies. 

If  we  do  not  provide  these  credits  and  provide  them 
promptly,  we  shall  in  the  end  lose  far  more  through 
the  impairment  of  trade  and  trade  opportunities  than 
if  the  larger  portion  of  those  credits  were  to  prove  a 
loss  (which  will  by  no  means  be  the  case).  In  addi- 
tion, we  shall  lose  international  good-will,  which  is  a 
business  asset  not  to  be  underestimated.  The  total 
sum  required  to  meet  the  need  of  the  whole  of  Europe 
now  and  for  the  next  twelve  months  is  no  more  than 
our  expenditures  would  have  been  for  thirty  days  if 
the  war  had  lasted  but  one  month  longer. 

But  the  call  for  action  on  our  part  goes  far  beyond 
the  mere  advantage  of  sustaining  or  fostering  Amer- 
ican export  trade.  Unless  we  come  to  the  rescue  and 
do  it  quickly,  we  are  facing  the  prospect  of  cruel  suf- 
fering among  many  of  the  nations  of  Europe  during 
the  coming  winter,  with  the  possibility,  by  no  means 
remote,  of  revolutionary  uprisings  born  of  hunger  and 
hopelessness. 

How  far  and  how  deep  such  uprisings  would  go 


366     WAR    AND    FOREIGN     RELATIONS 

when  once  started  on  their  course,  and  how  and  where 
their  effects  would  make  themselves  felt,  no  one  can 
foretell.  The  sure  and  simple  preventive  is  to  enable 
the  European  nations  to  put  their  people  to  work  and 
to  nourish  them.  No  one  but  America  is  in  a  posi- 
tion to  accomplish  this.  By  wise  co-operation  between 
the  Government  and  private  capital,  we  can  do  it  with 
ease  and  without  imposing  upon  ourselves  any  real  sac- 
rifice. If  we  fail  to  do  it  we  shall  not  only  fail  in 
what  seems  to  me  our  manifest  duty  from  the  ethical 
point  of  view,  but  also  in  prudence  and  foresight  con- 
cerning our  own  affairs. 

Europe  needs  America's  financial  aid  at  this  juncture 
a  good  deal  more  than  it  needs  America's  participation 
in  the  League  of  Nations. 

The  allegation  put  forward  by  those  who  advocated 
hasty  and  unconditional  ratification  of  the  Covenant 
that  American  private  capital,  spontaneously  and  by 
itself,  would  have  taken  care  of  the  financial  require- 
ments of  Europe  if  the  Peace  Treaty  had  been  ratified 
and  that  all  this  time  it  has  stood  ready  and  is  now 
standing  ready  to  come  forward  to  the  needed  extent, 
awaiting  only  ratification,  is  not  in  accord  with  the 
facts.  The  ratification  or  non-ratification  of  the 
Treaty  by  the  Senate  has  very  little  bearing  upon  the 
attitude  of  private  and  corporate  capital  toward  Euro- 
pean loans  and  credits. 

For  all  purposes  of  international  trade  and  credit, 
Europe  is  set  up  now  pretty  much  as  it  will  be  under 
the  provisions  of  the  Peace  Treaty.  The  principal 
Peace  Treaty  having  been  ratified  by  three  of  the  great 


AMERICA   AND    LEAGUE    OF    NATIONS      367 

Allied  Governments,  is  in  effect  actually,  for  all  com- 
mercial purposes,  and  will  be  in  effect  formally  if  and 
when  Germany  affixes  her  signature  to  the  supplemen- 
tary Protocol  recently  presented  to  her. 

As  a  matter  of  fact,  contrary  to  vociferous  allega- 
tions, it  does  not  appear  that  the  actions  of  the  Amer- 
ican Senate  have  thus  far  caused  any  delay  in  the  carry- 
ing out  of  the  Peace  Treaty.  The  date  set  by  the  Allies 
for  the  Treaty  to  go  into  effect  formally  is  December 
1,  1919.  If  the  Senate  had  ratified  the  instrument,  it 
would  not  have  gone  into  effect  any  earlier.  That  date 
is  not  yet  upon  us,  and  at  the  present  writing  it  seems 
very  unlikely  that  it  can  be  adhered  to  because  of  the 
unwillingness  of  Germany  to  agree  to  the  supplemen- 
tary Protocol — an  unwillingness  due,  demonstrably, 
not  to  the  action  of  the  Senate,  though  that  happens  to 
coincide  in  time  and  may  afford  an  additional  pre- 
text, but  to  the  contents  of  the  Protocol  and  to  domestic 
considerations. 

What  is  needed  and  has  been  needed  all  along,  ir- 
respective of  the  Peace  Treaty,  to  start  the  processes 
of  normalizing  and  stabilizing  economic  conditions  in 
Europe,  with  the  resulting  relief  to  the  world  and  bene- 
fit to  our  own  institutions,  is  a  definite  and  purposeful 
lead  to  that  effect  on  the  part  of  the  Administration 
and  appropriate  legislation  by  Congress.  Private  cap- 
ital will  not  fail  to  do  its  share  to  the  full  extent  of  its 
capacity. 


A  LETTER  TO  AN  ENGLISHMAN 


G 


OD'S  Providence  has  brought  America  and  Great 
Britain  together  after  a  century  and  a  half  of  aloof- 
ness. Few  events  so  fraught  with  promise  of  good  for 
the  world  have  occurred  in  history.  It  would  be  a 
tragedy  if,  through  any  act  of  omission  or  commission, 
the  attainment  of  the  full  possibilities  of  that  new 
grouping  were  to  be  jeopardized,  or,  worse  still,  the 
two  nations  were  to  drift  apart  again. 

America  and  England  are  in  the  same  boat  at  last, 
as  they  should  and  might  have  been  long  ago.  Those 
of  us  who  understand  and  have  affection  for  England — 
not  quite  easy  to  understand,  not  taking  much  pains 
about  making  herself  understood,  little  given  to  en- 
couraging affection,  and  rather  diffident  and  reluctant 
to  accept  it  except  from  her  own  kith  and  kin — rejoice 
exceedingly  in  this  prospect  of  a  journey  of  Great 
Britain  and  America  in  close  propinquity,  bound  for 
the  same  goal.  All  America,  with  insignificant  excep- 
tions, is  in  that  boat.  Not  a  few,  it  must  be  admitted, 
have  entered  it  with  hesitation,  some  even  under  pro- 
test— but  being  in  it,  every  one  is  pulling  his  oar. 

Whether  and  for  how  long  the  common  journey  is  to 
be  continued,  after  the  immediate  object  of  the  present 

October,  191 7. 

368 


LETTER     TO     AN     ENGLISHMAN        369 

excursion,  the  destruction  of  Prussianism,  shall  have 
been  reached,  is  largely,  very  largely,  "up  to"  England, 
for  reasons  inherent  in  the  psychology  of  the  situation. 
I  do  hope  that  she  will  make  use  of  the  opportunity  af- 
forded by  this  first  voyage  together,  to  get  herself  really 
known  by  her  fellow-voyager,  that  she  will  take  with 
a  good  grace  certain  differences  of  viewpoint,  traditions 
and  conduct,  and  above  all,  that  she  will  realize  that 
her  companion  is  a  "composite"  being,  a  child  of  the 
crucible,  as  Roosevelt  called  him.  If  she  means  to  get 
along  with  him,  she  will  have  to  take  him  just  as  he  is, 
including  those  elements  in  his  make-up  which  are  for- 
eign to  her  (doubly  foreign  in  one  speaking  her  own 
language)  and  which  ordinarily  she  would  be  inclined 
to  regard  with  wondering  wariness. 

That  fellow-voyager  is  a  self-reliant,  sturdy  young 
chap.  He  is  not  without  the  failings  of  youth,  but  he 
also  has  its  fine  qualities  and  generous  impulses.  His 
heart  and  brain  are  in  the  right  spot.  Underneath  a 
certain  unsophisticated  propensity  for  indulging  in 
"tall  talk"  he  is  at  bottom  truly  modest.  Underneath 
an  outer  skin  of  matter-of-factness,  he  is  a  good  deal 
of  an  idealist.  He  is  open-minded,  quickwitted, 
kindly,  frank,  direct,  unceremonious.  He  is  eager  to 
make  friends  and  expects  to  find  a  reciprocal  disposi- 
tion in  those  he  meets. 

These  all  are  national  traits  and  do  not  appertain 
merely  to  the  American  of  Anglo-Saxon  stock.  Con- 
trary to  a  somewhat  widespread  impression,  the  Amer- 
ican melting  pot  has  produced  a  race,  the  overwhelming 
majority  of  which,  in  essentials,  feel  and  act  much 


370     WAR    AND    FOREIGN    RELATIONS 

alike.  Unless  that  fact  is  recognized  and  acted  upon  by 
England,  Anglo-American  relations  cannot  assume  last- 
ingly that  character  of  genuine  good-will  and  harmo- 
nious co-operation  which  is  so  greatly  to  be  desired.  A 
limited  friendship  is  a  contradiction  in  terms.  A  friend- 
ship between  nations  which  fails  to  include  a  very  large 
percentage  of  the  populations  concerned  does  not 
"stand  four-square  to  all  the  winds  that  blow."  It  is 
apt,  indeed,  to  lead  to  a  relationship  which  is  perhaps 
less  to  be  desired  than  a  frankly  conceded  absence  of 
friendship. 

And  there  is  the  rub. 

Writing  to  one  as  well  posted  on  American  affairs  as 
you  are,  I  need  not  go  into  a  dissertation  or  analysis  of 
the  more  or  less  gentle  sport  of  "twisting  the  lion's 
tail,"  a  sport,  the  devotees  of  which  are  by  no  means 
confined  to  Americans  of  non-Anglo-Saxon  extraction. 
It  is  one  of  the  accepted  conventions  of  that  sport  that 
those  indulging  in  it  must  keep  well  within  certain  lines 
or  they  will  be  promptly  and  energetically  stopped  by 
the  bystanders;  indeed,  the  overwhelming  majority  of 
those  addicted  to  it  would  quickly  stop  it  of  their  own 
accord  if  they  felt  that  their  actions  might  really  bring 
about  a  quarrel  between  the  Lion  and  the  Eagle.  I  am 
reminded  of  a  boy  of  my  acquaintance  in  the  days  of 
my  youth,  who,  reprimanded  for  having  been  uncivil  to 
another  boy,  exclaimed  with  unfeigned  conviction: 
"Why,  I  don't  have  to  be  polite  to  him.  He's  a  cousin 
of  mine.    Cousins  don't  fight." 

Neither  need  I  endeavor  to  enlighten  you  concerning 
the  feeling  and  attitude  of  Americans  of  Irish  descent,1 


LETTER     TO     AN      ENGLISHMAN        37 1 

because  that  problem  is  fully  understood  in  England, 
and  particularly  by  you. 

What  I  mean  to  emphasize  is  that  there  are  in  the 
United  States  more  than  twelve  millions  of  men, 
women  and  children  of  German  birth  or  descent.  They 
have  been  heretofore  an  excellent  element  in  our  citi- 
zenry and  are  a  deservedly  influential  factor  in  the  ag- 
gregation of  races  which  is  America. 

One  of  those  of  German  descent  is  Charles  M. 
Schwab,  the  famous  ironmaster,  whose  services  to  the 
Allied  cause  need  no  emphasizing.  Another  is  Gen- 
eral Kuhn,  the  head  of  our  General  Staff.  A  third 
is  Congressman  Julius  Kahn,  born  in  Germany  of  Ger- 
man parents,  who  successfully  led  the  fight  in  Congress 
for  conscription  to  raise  our  armies  for  the  war,  and 
who,  in  various  other  ways,  has  thrown  his  great  in- 
fluence, as  ranking  Republican  member  on  the  Military 
Committee  of  the  House  of  Representatives,  on  the 
side  of  all  measures  making  for  the  promptest  possible 
exercise  of  the  full  powers  of  the  United  States  in  the 
conduct  of  the  war.  Two  others  are  Bernard  Baruch 
and  Julius  Rosenwald,  who  are  counted  among  the 
most  efficient,  valuable  and  zealous  members  of  that 
important  body,  the  Advisory  Council  of  National  De- 
fense. The  list  could  be  prolonged  to  great  length. 
Colonel  Roosevelt  has  stated  publicly  that  the  Volun- 
teer Division  which  he  had  arranged  to  take  to  France 
if  the  President  had  given  permission,  contained  a 
great  many  Americans  of  German  descent  and  that  he 
had  designated  a  number  of  them  for  officers'  com- 
missions. 


372     WAR    AND    FOREIGN    RELATIONS 

Numerous  German- Americans  (to  use,  for  the  sake 
of  brevity,  an  ugly  term)  knowing  and  correctly  gaug- 
ing the  abhorrent  spirit  and  intolerable  aims  of  Prus- 
sianism  were  and  acted  from  the  very  beginning,  in 
1914,  wholeheartedly  in  favor  of  the  Allies,  though 
most  of  these  adherents  of  the  Allied  cause  refrained 
from  open  demonstration  because  they  felt  they  were 
not  entirely  welcome  or  entirely  trusted  in  the  Allied 
camp,  and  their  self-respect  and  fear  of  having  their 
motives  misinterpreted  forbade  them  to  give  voice  pub- 
licly to  their  true  feelings.  Others,  again,  who  had  been 
hesitant  or  even  pro-German  in  their  sympathies  in  the 
early  stages  of  the  war,  gradually,  as  the  hideousness  of 
the  spirit  and  doctrines  of  Junkerdom  revealed  itself 
in  revolting  deeds,  began  to  realize  that  the  cause  of 
the  Allies  was  that  of  right  and  humanity,  and  adjusted 
their  attitude  to  that  recognition. 

A  considerable  number,  especially  of  the  Jewish  faith 
whose  apparent  pro-Germanism  had  merely  been  anti- 
Czarism  as  they  were  unable  to  believe  in  or  adhere  to 
a  cause  of  the  success  of  which  the  old  Russian  regime 
was  to  be  one  of  the  principal  beneficiaries,  became  con- 
verts to  the  Allied  cause,  coincident  with  the  Russian 
revolution,  and  demonstrated  the  genuineness  of  their 
new  allegiance,  even  before  America  entered  the  war, 
by  energetically  using  their  influence  in  Russia  against 
all  thought  of  a  separate  peace. 

And,  with  the  entrance  of  America  into  the  war,  the 
mass  of  German-Americans,  even  though  with  heavy 
hearts  and,  some  of  them,  still  unconvinced,  fell  into 
line — with  the  exception  of  an  extreme  fringe  confined, 


LETTER     TO     AN      ENGLISHMAN        373 

in  the  main,  to  certain  sections  of  the  country  and  cer- 
tain strata  of  the  people,  and  augmented  by  what  may 
be  termed  the  professional  spokesmen  of  Pro-German- 
ism. 

(Let  it  be  said  in  this  connection  that  German-Amer- 
icans, whether  gentile  or  Jew,  must  not  be  confounded 
with  Russian  Jews  naturalized  or  temporarily  resident 
in  America.  Many  of  these,  too,  have  proved  them- 
selves desirable  and  useful  elements  in  our  many- 
rooted  population,  but  a  certain  proportion,  the 
products  of  centuries  of  oppression  and  persecution 
and  misery,  ignorant  of  liberty  and  unacquainted  with 
its  use,  have  permitted  themselves  to  be  made  the  vic- 
tims and  deluded  followers  of  Utopian  or  corrupt  ex- 
tremists, too  often  of  their  own  faith  and  race.) 

Englishmen,  the  bearers  and  embodiment  of  the 
traditions  of  a  thousand  years,  have  their  national  roots 
deep  down  in  an  age-long  past.  Therefore,  they  find 
it  difficult  to  understand  that  men  of  foreign  birth  or 
even  merely  of  foreign  parentage,  can  so  divest  them- 
selves of  their  inherited  national  promptings  as  to  be- 
come wholeheartedly  and  unreservedly  American  and 
to  act  as  such  under  whatever  test.  Judging  others  by 
themselves,  they  are  apt  to  entertain  and  to  show  a 
certain  skepticism,  if  not  incredulous  aversion,  toward 
the  pro-Ally  declarations  or  even  acts  of  Americans  of 
German  origin. 

Now,  in  contradistinction  to  the  average  Englishman, 
it  is  given  to  the  men  of  many  other  races  to  be  able  in 
a  relatively  short  space  of  time  to  merge  themselves 


374     WAR    AND    FOREIGN    RELATIONS 

wholly  and  unqualified  and  genuinely  in  the  mass  of 
the  people  of  a  country  to  which  they  have  transplanted 
themselves.  This  is  perhaps  particularly  so  in  the  case 
of  the  German  (you  will  recall  Bismarck's  complaint 
on  that  score)  and  the  Jew.  Their  innate  national 
feeling  is  not  and  cannot  be  anything  like  as  strong  and 
deep-rooted  as  the  Englishman's.  The  Germans, 
however,  have  felt  nationally  some  fifty  years  only. 
Before  that  they  were  Bavarians,  Saxons,  Hessians, 
Prussians,  etc.,  with  widely  divergent  interests  and 
traditions,  with  a  pronounced  dislike  of  the  South  Ger- 
man toward  the  North  German  and  at  times  engaged 
in  fighting  one  another.  As  for  the  Jews,  for  nearly 
two  thousand  years  they  were  not  permitted,  in  most 
countries,  to  consider  themselves  part  and  parcel  of 
the  nation  in  the  midst  of  which  they  had  their  abode, 
and  the  privilege  to  do  so  and  to  strike  root  has  only 
been  conferred  upon  them  in  the  relatively  recent  past. 

The  burden  of  my  argument  is  that  genuine  harmony 
of  Anglo-American  relationship  cannot  be  secured  if  a 
large  and  influential  section  of  the  American  people 
are  to  be  kept  apart.  I  am  convinced  that  no  recruit, 
whatever  his  race  or  origin,  who  in  good  faith  wishes 
to  join  the  ranks  of  those  believing  in  and  desirous  of 
furthering  that  aim,  ought  to  be  turned  aside,  dis- 
criminated against,  or  looked  at  askance.  The  burden  of 
proof  ought  not  to  be  on  him.  His  professions  ought  to 
be  taken  at  their  face  value,  unless  there  is  specific  rea- 
son to  the  contrary.  Whatever  the  attitude  and  feeling 
of  a  cruelly  and  unspeakably  outraged  world  toward 


LETTER     TO     AN      ENGLISHMAN        375 

Germany  and  Germans,  now  and  hereafter,  Americans 
ought  to  and  have  the  right  to  demand  that  they  be 
looked  upon  and  treated  as  Americans  without  regard 
to  their  pedigree — at  the  risk  even  of  that  label  being 
abused  in  some  few  cases. 

Though  of  German  descent,  I  hold  no  brief  for 
German-Americans.  To  the  extent  that  they  deserve 
that  hyphenated  appellation,  they  are  utterly  repellent 
to  me;  I  detest  and  resent  their  attitude  and  point  of 
view,  and  I  have  the  honor  of  their  particular  hostility. 

My  plea  is  solely  that  everything  be  done  to  accom- 
plish and  that  nothing  be  done  to  endanger  the  full 
realization  of  that  which  the  well-wishers  of  both  na- 
tions have  so  long  vainly  desired — complete  under- 
standing and  cordial  permanent  co-operation  between 
Great  Britain  and  America. 


PART  FOUR:  CONCERNING  ART 


SOME  OBSERVATIONS  ON  ART 
IN  AMERICA 


T 


HE  cause  of  Art  is  making  steady  and  gratifying 
headway  in  this  country,  more  especially  the  cause  of 
Musical  Art.  Ours  is,  I  believe,  a  distinctly  musical 
people  even  though  America  has  not  been  notably  cre- 
ative as  yet  in  music.  Fondness  for  music  is  genuine, 
interest  widespread,  and  musical  talent  abounds.  True, 
we  have  not  thus  far,  in  our  public  at  large,  the  same 
degree  of  scholarly  knowledge  and  widespread  musical 
culture  that  is  found  in  Germany,  but  the  standard  is 
being  set  higher  and  serious  understanding  is  being 
advanced  all  the  time.  Music  seems  to  be  the  art  to 
which  the  soul  of  the  American  people  responds  most 
readily. 

It  has  often  struck  me  how  extraordinarily  keen  and 
sensitive  is  the  American  ear  for  music.  That,  I  sup- 
pose, results  from  climatic  and  related  conditions.  Cli- 
mate, soil,  extrinsic  circumstances  of  various  kinds,  far 
more  than  the  inherent  traits  of  the  original  stock  make 
the  race.  Anthropologists  have  demonstrated  that 
America  does  produce  a  distinct  race  of  its  own,  and 
that  nature  here,  with  astonishing  rapidity,  changes  the 
European  type  externally  and  internally.    The  climate 

October,  1913. 

379 


380  CONCERNING    ART 

of  America,  or  whatever  powerful  instrument  of  nature 
it  be,  apparently  exerts  some  manner  of  refining  in- 
fluence physically  and  upon  the  senses  in  more  direc- 
tions than  one.  That  does  not  mean  that  the  children 
of  immigrants  are  necessarily  a  better  type  than  the 
parents;  in  fact,  in  some  respects  it  is  a  pity  that  cer- 
tain of  the  qualities  and  traditions  of  the  imported  stock 
do  not  seem  to  adhere  to  the  children  or  to  continue  un- 
der the  conditions  of  life  in  America;  what  I  mean  is, 
that  usually  they  are  a  more  sensitive,  more  fastidious 
type. 

In  at  least  one  field  of  musical  art,  the  standard  of 
New  York  is  more  exacting  than  that  prevailing 
abroad. 

No  public,  to  my  knowledge,  is  so  discriminating  and 
educated  in  its  judgment  about  operatic  singing  as  the 
audiences  at  our  Metropolitan  Opera  House.  Their  col- 
lective judgment  is  almost  unerring  in  its  accuracy. 
For  more  than  a  generation  this  city  has  heard  the  very 
best  of  operatic  artists.  It  is  a  characteristic  of  the 
American  public  that  they  are  eager  to  learn,  quick  to 
grasp,  sure  to  retain,  very  insistent  on  having  the  best ; 
and  once  they  have  got  it  and  formed  their  taste  by  it 
they  do  not  fail  to  discover  and  discountenance  any 
deviation  from  that  standard.  When  once  they  have 
learned  to  know  the  genuine  article,  you  can  no  longer 
palm  off  counterfeit  or  inferior  goods  upon  them  under 
an  enticing  label. 

Foreign  artists  who  Have  come  to  our  shores — at 
times    with    erroneous    preconceptions — have    become 


OBSERVATIONS    ON    ART    IN    AMERICA    38 1 

well  aware  of  this.  They  have  learned  that  in  this 
country  may  be  found  exacting  and  accurate  judgment 
together  with  keen  and  generous  appreciation.  Time 
was  when  America  was  looked  upon  as  the  happy  hunt- 
ing ground  for  charlatanism  in  art  and  for  the  ex- 
ploitation of  reputations  worn  threadbare.  That  time 
has  long  since  passed.  Artistic  success  in  America  has 
now  come  to  be  considered  everywhere  as  difficult  to 
achieve  and  highly  to  be  valued. 


The  tendencies,  aims  and  conditions  of  life  of  mod- 
ern times  have  not  been  favorable  to  creative  art 
throughout  the  world,  though  this  has  affected  musical 
art  and  particularly  operatic  art  less  than  others.  In 
its  present  form,  anyhow,  music  is  the  youngest  of  the 
arts  and  therefore  the  least  exhausted,  so  to  speak.  And 
music  will,  I  imagine,  for  a  certain  period  become  the 
leader  in  art,  in  the  sense  in  which  painting  was  the 
leader  during  the  Renaissance.  It  is  the  most  eloquent 
of  the  arts,  the  most  individual,  the  most  deeply  mov- 
ing. 

Operatic  art  makes  its  appeal  to  the  eye,  the  ear,  the 
brain,  the  heart  simultaneously,  and  our  people  at  large 
seem  to  be  more  responsive  to  it  than  to  any  other  art 
manifestation.  I  do  not  mean  to  overestimate  the  place 
of  opera  in  musical  art.  It  is  not  the  highest  form  of 
musical  expression.  Orchestral  music,  and  still  more 
chamber  music,  hold  superior  rank.  But  opera  does 
seem  to  be  the  most  satisfying  food  for  the  art-hungry 
souls  of  a  great  many  people  and  to  be  particularly 


382  CONCERNING    ART 

adapted  to  this  time  and  to  the  temperament  of  this 
nation. 

All  human  development  has  occurred  by  stages.  The 
first  effort,  of  course,  has  ever  been  to  secure  safety 
of  living.  Then  come  the  economic  and  the  wider  na- 
tional efforts,  whose  victories  result  in  the  creation  of 
well-being,  power  and  wealth,  national  and  individual, 
and  following  them  comes  the  pursuit  of  art  and  cul- 
ture. 

There  always  has  been  with  the  advent  of  this  period 
in  a  nation's  development,  a  more  or  less  inarticulate, 
undefined  and  partly  unconscious  longing  of  a  great 
portion  of  the  people  for  something  which  shall  re- 
spond to  their  spiritual  aspirations,  something  quite  be- 
yond material  satisfaction.  That  longing  emanating 
from  the  nation's  soul,  expressed  and  felt  in  many  dif- 
ferent ways,  is — if  I  observe  aright — getting  to  be  ever 
stronger  and  more  clearly  discernible  in  the  United 
States.  Much,  I  believe,  may  be  hoped  from  it,  for 
the  call  of  a  people  does  not  remain  unanswered. 

I  have  travelled  pretty  well  throughout  the  country 
and  met  men  and  women  from  everywhere.  The  peo- 
ple of  all  sections  are  keenly  eager  for  nourishment  of 
mind  and  soul.  But  the  opportunities  offered  to  them 
to  meet  these  spiritual  desires  are  as  yet  far  from  ade- 
quate. This  being  the  case,  faute  de  mieux,  they  take 
what  they  can  find,  and  not  all  of  it  is  worthy.  Some 
of  the  substitutes,  indeed,  are  distinctly  deleterious. 

The  hankering  after  sensations,  for  instance,  so 
noticeable  in  this  country,  and  the  vogue  of  certain 


OBSERVATIONS    ON    ART    IN    AMERICA    383 

trashy  or  vulgarizing  entertainments,  are,  I  am  inclined 
to  surmise,  largely  manifestations  of  this  desire  gone 
wrong  in  its  groping  for  satisfaction.  To  a  certain 
extent  at  least,  some  of  the  ominous  tendencies  and 
turbulent  movements  of  the  day,  may,  I  believe,  be 
traced  to  the  same  cause. 

Our  people  have  frequently  demonstrated  the  fac- 
ulty and  willingness  to  recognize,  whenever  it  exists, 
genuine  merit  in  the  artistic  offerings  placed  before 
them.  They  are  open-minded,  always  on  the  alert  for 
improvement,  and  possess  the  great  advantage  of  hav- 
ing no  ingrained  artistic  prejudices  or  superannuated 
traditions  to  overcome.  Show  them  the  better  thing, 
and  they  will  recognize  it  readily  and  will  rise  to  it 
with  real  appreciation.  I  know  of  no  case  where  any- 
thing really  meritorious  has  been  offered  to  our  public, 
of  late  years,  which  they  did  not  recognize  as  such  and 
welcome.  If,  on  the  one  hand,  the  nation's  taste  in 
art  matters  has  not  yet  had  sufficient  time  and  op- 
portunity and  leadership  to  be  trained  so  as  to  make 
its  negative  judgment  steadily  reliable — that  is,  if  it 
does  not  repudiate  scornfully  the  bad  and  meretricious, 
and  if,  indeed,  sometimes  it  mistakes  that  for  the  good 
— it  is  still  true  that  I  have  never  known  it  to  err  upon 
the  other  side :  Our  people  do  not  see  the  genuine  and 
think  it  paste,  nor  do  they  ever  fail  to  rise  to  lofty 
appeal.  They  have  a  rarely  failing  instinct  for  what  is 
really  worth  while. 

I  have  known  them  to  make  the  judicious  grieve  by 
mistaking  sentimentalism  for  feeling,  ranting  for  pas- 


384  CONCERNING      ART 

sion,  exaggeration  for  truth,  coarse  jokes  for  wit, 
tawdry  tinsel  for  beauty.  But  while  many  things 
which  seemed  to  me  little  better  than  rubbish  have  suc- 
ceeded I  have  never  known  the  truly  good  to  fail.  For 
instance,  at  the  Opera,  "Pelleas  and  Melisande,"  cer- 
tainly a  deeply  serious  work  and  not  containing  the 
ingredients  of  popular  appeal,  secured  instant  recogni- 
tion in  this  country.  It  doubtless  was  "above  the 
heads"  of  a  good  many  of  the  audience,  yet  they  ap- 
preciated intuitively  that  here  was  something  deep  and 
noble  and  beautiful,  and  they  felt  its  spell.  The  sim- 
ple charm  and  the  poetry  of  Humperdinck's  "Haensel 
and  Gretel"  and  "Koenigskinder"  have  met  nowhere 
with  a  more  sincere  and  cordial  response  than  on  the 
part  of  our  audiences. 

And  on  the  dramatic  stage,  as  an  illustration,  take 
"Everyman,"  serious  and  solemn  and  unadorned — and 
an  immense  success  in  New  York.  I  could  multiply 
instances  to  justify  my  faith  that  the  public  here  in- 
variably respond  when  the  true  appeal  is  made  to  them. 

I  wish,  though,  we  would  do  a  little  more,  indeed 
much  more,  to  encourage  and  support  the  best  in  art, 
and  to  give  incentive  and  opportunity  to  American 
artists.  I  wish  and  hope  particularly  that  our  men  of 
wealth  will  come  to  heed  the  call  of  art  as  they  heed 
so  willingly  and  generously  the  calls  of  educational, 
scientific  and  charitable  institutions. 

The  number  of  millionaires  in  America  has  increased 
so  rapidly  during  the  past  twenty  years  that  there  does 
not  adhere  to  them  any  longer  what  art  collectors  call 


OBSERVATIONS    ON    ART    IN    AMERICA    385 

"scarcity  value."  Time  was  when  the  mere  possession 
of  wealth  gave  a  man  a  position  of  leadership,  or,  at 
least,  eminence  in  the  community.  That  has  become 
less  and  less  so  in  this  country.  Indeed,  I  should  say 
that  it  is  now  less  true  of  conditions  in  America  than 
in  Europe.  Contrary  to  traditional  opinion,  I  believe 
that  money  altogether  counts  for  rather  more  in  the 
way  of  conferring  power  and  distinction  in  Europe 
than  here.  Europeans  are  in  the  habit  of  looking  upon 
Americans  as  a  people  of  stark  materialism.  In  that 
view  they  fail  to  appreciate  the  fact  that  what,  gen- 
erally speaking,  impels  our  people  to  restless  striving, 
is  not,  in  the  first  instance,  the  spirit  of  acquisitiveness, 
but  ambition,  the  will  to  rise,  to  "get  there,"  to  suc- 
ceed, to  excel,  of  which,  in  business,  the  dollar  happens 
to  be  the  outward  token. 

Nowadays  the  mere  ownership  of  wealth  no  longer 
confers  honor.  In  fact,  a  good  many  of  our  people 
have  gone  to  the  opposite  extreme,  equally  wrong,  of 
condemning  and  looking  askance  and  railing  at  men 
merely  because  they  have  wealth.  At  any  rate,  the  rich 
man  who  aspires  to  honor  and  influence  is  rightly  chal- 
lenged to  prove  his  title  to  them  apart  from  his  wealth. 
If  he  has  aspirations  beyond  mere  monetary  success 
he  must  gain  his  spurs  in  service  to  the  community. 

For  reasons  which  need  not  be  discussed  here,  it  is 
difficult  for  him  to  enter  politics  and  to  put  his  abilities 
and  experience  in  the  service  of  his  country  in  that  field 
of  activity.  He  can  and  does  take  part  in  all  sorts  of 
philanthropic,  charitable,  and  communal  work,  and  he 
does  so  with  a  greater  generosity  in  the  expenditure  of 


386  CONCERNING    ART 

his  money  and  effort  than  is  the  case  in  any  other  coun- 
try— and,  incidentally  speaking,  he  does  it  in  nearly 
all  cases  purely  from  a  sense  of  duty  and  public  spirit, 
because  he  does  not  receive  in  this  country  any  of  the 
outward  honors  and  rewards  which  are  freely  bestowed 
in  European  countries  in  recognition  of  similar  work. 
But  the  great  and  vastly  promising  field  of  art  still 
awaits  the  adequate  attention  of  men  of  wealth.  Of 
course,  money  cannot  create  art,  but  if  rightly  used  it 
can  be  its  helpmate  and  it  should  be. 

Let  any  one  who  does  not  appreciate  the  influence  of 
the  stage  on  the  people,  their  hunger  for  its  offerings, 
and  the  importance  to  them  and  to  the  community  of 
whether  such  offerings  are  of  the  worthy  or  degrading 
variety,  read  what  Miss  Jane  Addams  has  to  say  on 
this  subject  in  her  admirable  book,  "The  Spirit  of 
Youth  in  the  City  Streets." 

Unfortunately,  among  the  people  who  could  help 
most  materially  in  the  direction  which  I  have  indicated 
there  are  still  relatively  few  who  look  upon  art  as  the 
strong  educational,  social  and  moral  factor  which  it  is, 
who  take  it  as  seriously  as  it  deserves  to  be  taken  as  a 
potent  agency  in  forming  and  guiding  the  thoughts  and 
sentiments  and  conduct  of  the  people,  and  a  great  boon 
to  vast  numbers  in  making  their  lives  fuller,  happier 
and  more  beautiful. 

As  against  many  hundreds  who  will  freely  give  of 
their  time,  effort,  and  substance  for  charitable,  edu- 
cational, and  other  altruistic  purposes,  there  is  barely 
one  who  is  sufficiently  impressed  with  the  dignity  and 
far-reaching  influence  of  art  to  do  the  same  for  its 


OBSERVATIONS    ON    ART    IN    AMERICA    387 

cause.  Some  of  the  spirit  which  in  former  times  in 
England  ranked  actors  with  vagabonds,  and  the  stage 
accordingly,  still  survives.  The  theatre,  both  the 
operatic  and  the  dramatic  branch,  is  still  considered  by 
many  of  our  successful  men  as  merely  a  diversion — 
not  a  thing  of  sufficient  import  and  dignity  to  be  con- 
sidered worthy  of  the  active  interest  of  serious  men. 
In  fact,  by  some  it  seems  to  be  regarded  as  almost 
infra  dig.  for  a  reputable  business  man  to  devote  part 
of  his  spare  time  and  energy  to  active  occupation  with 
operatic  and  dramatic  affairs  as  he  would  with  hospital 
work  or  communal  effort.  Even  his  motives  in  doing 
so  are  liable  to  be  misjudged. 

In  this  huge  country  of  ours,  we  need  not  one,  but  a 
dozen  theatres  of  the  type  of  the  Comedie  Franchise, 
a  dozen  opera  houses,  permanent  orchestras,  etc.,  that 
shall  know  no  consideration  except  to  serve  and  stead- 
fastly to  adhere  to  the  highest  standard  of  artistic  en- 
deavor. We  need  institutions  to  train  and  guide  aright 
the  amazing  quantity  of  all  kinds  of  artistic  talent 
which  is  latent  among  the  people  of  our  country,  and 
so  much  of  which,  alas !  goes  to  waste  for  lack  of  oppor- 
tunity, inspiration  and  guidance. 

In  referring  to  the  need  for  theatres  of  the  type 
of  the  Comedie  Francaise,  I  do  not  mean  to  reflect 
unfairly  upon  the  managers  of  our  theatres  in  gen- 
eral, nor  would  the  work  I  have  in  mind  interfere 
with  that  done  by  them,  just  as  the  existence  of  the 
Comedie  Franchise  does  not  interfere  with  the  many 
self-supporting  theatres  in  France.     But  in  order  to 


388  CONCERNING    ART 

develop  and  cultivate  the  public  taste  so  that  it  may 
come  to  banish  what  is  tawdry  and  sham  and  vulgar, 
certain  pioneer  work  has  got  to  be  done,  certain  stand- 
ards of  comparison  must  be  set  and  maintained. 

It  cannot  be  expected  of  the  theatrical  manager 
who  has  his  own  and  his  family's  living  to  make  and 
future  to  secure,  and  to  take  constantly  the  risks  of  an 
at  best  uncertain  business,  that  he  will  work  altruisti- 
cally in  what  is,  after  all,  his  means  of  livelihood.  It 
would  not  be  fair  to  ask  of  him  that  for  the  sake  of 
an  ideal  he  should  disregard  his  monetary  interest, 
though — to  their  honor  be  it  said — more  than  one  of 
them  at  times  has  deliberately  and  willingly  made 
financial  sacrifices  in  the  cause  of  art  and  from  altruis- 
tic motives,  and  their  public  spirit  is  rarely  appealed 
to  in  vain. 

America  is  full  of  talent  of  all  kinds.  It  really  looks 
as  if  all  you  have  to  do  is  to  ask  with  sufficient  in- 
sistence for  its  manifestation  in  some  particular  direc- 
tion, and  you  will  get  it.  The  demand  creates  the  sup- 
ply. To  quote  an  example:  Up  to  say  some  twenty 
years  ago  we  depended  almost  entirely  upon  European 
operatic  artists,  and,  especially,  upon  European  repu- 
tations. But  as  the  love  of  opera  and  the  interest  in 
it  became  more  widely  diffused  among  the  people,  de- 
mand arose  for  American  singers,  and  when  the  de- 
mand came,  they  came — and  with  a  rush,  at  that, 
amazing  in  quantity  and  quality.  Since  that  time  we 
have  produced  at  least  as  many  women  opera  singers 
of  excellence  as  any  of  the  European  nations.     The 


OBSERVATIONS    ON    ART    IN    AMERICA    389 

Opera  Houses  of  Europe  are  full  of  American  women 
artists  in  leading  positions. 

In  the  production  of  male  singers  we  have  been 
much  less  conspicuous,  possibly  because  the  tendency 
of  our  boys'  upbringing  is  rather  toward  sterner  or 
more  matter-of-fact  things. 

Take  another  instance  of  demand  creating  supply 
in  a  matter  of  art:  Until  about  twenty  years  ago  we 
were  content  with  "brownstone  houses"  in  the  city, 
ugly  of  design  and  built  in  monotonous  rows,  destruc- 
tive of  beauty  and  individuality.  Many  people  doubt- 
less realized  the  unsightliness  of  that  style  and  manner 
of  architecture,  but  we  did  not  rebel  against  it  for  a 
long  time.  When  at  last  we  did,  we  found  men  on 
hand  who,  having  learned  their  lessons,  mainly  at  the 
Ecole  des  Beaux  Arts  in  Paris,  and  having  learned 
them  well,  were  fully  qualified  and  able  to  guide  the 
movement  aright  and  to  translate  it  into  execution. 

The  result  has  been  astonishing.  In  an  amazingly 
short  time  what  a  transformation  has  taken  place  in 
our  residential  districts.  Our  private  houses  of  more 
recent  construction  are  certainly  equal,  and  often  su- 
perior, in  comfort,  arrangement  and  taste  to  the  aver- 
age of  the  same  class  in  Europe.  Many,  indeed  most, 
of  our  public  and  semi-public  buildings  erected  within 
the  last  decennium,  instead  of  being  eyesores,  as  were 
so  many  of  those  erected  in  former  years,  have  become 
ornaments  to  the  city.  Our  architects,  as  a  whole,  ad- 
mittedly rank  at  least  equal  now  with  those  of  any 
other  country. 

The  manner  in  which  these  architects  were  ready  at 


390  CONCERNING    ART 

once  to  meet  the  difficult  and  novel  problem  of  "sky- 
scrapers," and  the  bold,  original  and  altogether  admir- 
able way  in  which  they  have  solved  it,  is  another  case 
in  point. 

Our  painters,  too,  have  made  great  strides  of  recent 
years.  The  average  level  of  excellence  attained  by 
them,  again,  is  generally  acknowledged  to  be  equal  to 
that  of  any  country  except  France,  not  to  mention  the 
American  Sargent,  who,  as  a  portrait  painter,  is  held 
to  be  without  a  peer  among  living  artists.  What  is 
true  of  our  painters,  holds  good  also  of  our  sculptors. 
It  is  sufficient  to  mention  the  names  of  St.  Gaudens 
and  McMonnies.  And  it  should  be  remarked  that  our 
painters  and  sculptors  have  accomplished  their 
achievements  notwithstanding  the  fact  that  they  have 
received  and  are  receiving  far  less  encouragement  and 
support  and  opportunity  in  their  home  country  than 
foreign  artists  receive  in  theirs.  The  regrettable  cir- 
cumstance that  to  this  day  we  have  no  suitable  build- 
ing for  art  expositions  in  New  York,  is  characteristic 
and  eloquent. 

Altogether,  I  believe,  we  have  here  all  the  elements 
which  make  for  genuine  and  great  art  development. 
We  are  on  the  ascending  line,  and  I  think  it  will  re- 
quire only  some  favoring  impulses  to  bring  this  ten- 
dency to  full  fruition. 

Any  system  of  education  would  be  lopsided  which 
did  not  include  the  cultivation  of  the  capacity  to  feel 
and  appreciate  what  is  beautiful  in  art  and  nature, 
thought  and  deed.     We  should  strive  to  develop  and 


OBSERVATIONS    ON    ART    IN    AMERICA    39I 

cultivate  every  one  of  the  capacities  with  which  the 
individual  is  endowed.  There  are  few  things  more 
conducive  to  discontent  and  self- torment  than  the  pos- 
session of  qualities  which  are  ignored,  repressed  or 
denied  expression. 

In  a  country  still  young,  confronted  by  such  vast 
material  opportunities  and  demands  as  ours,  the  ten- 
dency up  to  a  comparatively  recent  period,  has  natur- 
ally been  rather  to  overemphasize  the  development  of 
those  qualities  which  make  for  material  achievement, 
and  to  look  upon  qualities  of  less  substantial  texture 
and  effect  as  somewhat  in  the  nature  of  useless  bal- 
last in  the  race  for  success,  if  not  as  positively  harmful. 
But,  there  can  be  no  doubt  that  a  significant  and  grati- 
fying tendency  has  set  in  toward  an  enhanced  apprecia- 
tion of  things  not  material  or  utilitarian. 

I  am  tempted  to  think  that  the  underlying  reason 
for  this  tendency  is  analogous  to  the  one  which,  it 
seems  to  me,  has  produced  a  corresponding,  but  oppo- 
site, drift  in  Europe  of  recent  years.  There,  with  the 
heavy  burden  of  taxation,  with  far  less  natural  re- 
sources of  soil,  with  an  overcrowded  population,  the 
material  problems  have  become  so  paramount  as  to 
make  their  solution  the  most  vital  and  pressing  task 
before  the  nations.  Business,  in  its  widest  sense,  the 
national  and  individual  struggle  for  commercial  ad- 
vancement, have  come  to  occupy  a  vastly  more  im- 
portant and  absorbing  place  in  the  life  and  the  mind 
of  the  people  on  the  European  continent,  than  was  the 
case  a  generation  ago. 


392  CONCERNING    ART 

To  round  out  these  cursory  remarks,  I  should  have 
to  go  on  and  speak  of  the  achievements  and  promise 
of  our  actors,  playwrights,  novelists,  poets  and  of  those 
in  the  minor  arts — most  of  them,  be  it  remembered, 
the  same  as  our  painters,  sculptors  and  musicians, 
handicapped  more  or  less  by  lack  of  that  competent, 
systematic,  comprehensive  and  easily  accessible  train- 
ing and  guidance  in  their  early  years  (and,  later  on, 
frequently  by  lack  of  that  recognition,  opportunity, 
understanding  and  encouragement)  which  are  offered 
in  most  European  countries.  But  this  article  has  al- 
ready been  extended,  I  fear,  beyond  the  space  assigned 
to  me.     Let  me  merely  add  this  in  closing: 

If,  as  I  trust  and  believe  will  come  to  pass,  we  will 
give  to  art  that  full  scope  and  place  and  honor  to  which 
it  is  entitled,  if  we  make  it  widely  and  easily  accessi- 
ble to  the  people,  if  we  afford  serious  encouragement, 
fostering  attention  and  adequate  opportunity  to  gen- 
uine aspirations  and  talent,  and  due  reward  to  genuine 
merit,  we  shall,  I  am  convinced,  astonish  the  world 
and  ourselves  by  the  greatness  and  intensity  of  the 
manifestation  of  the  American  spirit  in  art. 


AN  EXPERIMENT  IN  POPULAR 
PRICED  OPERA 


w, 


HILE  it  has  been  found  necessary,  under  the 
wholly  exceptional  circumstances  now  prevailing,  to 
relinquish  for  the  time  being  the  venture  of  popular 
priced  opera  undertaken  by  the  Century  Opera  Com- 
pany, yet  the  experiment  has  been  of  value  and  war- 
rants the  belief  that  there  is  a  distinct  place  for  such 
an  organization  and  that,  under  normal  conditions,  it 
can  be  made  self-sustaining. 

The  Century  Opera  had  hard  luck  in  that,  so  soon 
after  it  had  come  into  existence,  it  struck  conditions 
resulting  from  the  European  war,  which  subjected  the 
affairs  of  the  stage  to  an  almost  unprecedented  strain. 
It  had  not  yet  become  firmly  grounded  and  hardy 
enough  to  stand  up  against  the  storm  of  adversity 
which  swept  over  the  field  of  operatic  activities  during 
the  past  season.  Its  older  sisters,  the  Chicago  Opera 
Company  and  the  Boston  Opera  Company,  did  not 
venture  to  open  their  doors;  most  of  the  opera  houses 
in  Europe  are  either  closed  or,  where  open,  are  en- 
abled to  operate  only  by  paying  purely  nominal  sal- 
aries to  their  artists. 

The  board  of  the  Century  Opera  Company,  although 

April,  1915. 

393 


394  CONCERNING    ART 

fully  alive  to  the  risk  of  venturing  on  a  season  under 
the  prevailing  adverse  conditions,  particularly  while 
maintaining  ante-bellum  salaries,  nevertheless  went 
ahead,  mainly  out  of  consideration  for  the  artists  and 
other  employes  under  engagement,  and  although  the 
season  had  to  be  brought  to  a  close  prematurely,  yet 
the  company  has  been  able  to  give  sixteen  weeks'  em- 
ployment to  those  whom  it  had  engaged. 

The  scale  of  prices  ranged  from  $2  to  25  cents. 
The  cheaper  seats,  from  $1  to  25  cents,  were  sold  out 
for  the  great  majority  of  all  performances.  The  mat- 
inees, in  which  the  highest  priced  seats  were  $1,  nearly 
always  were  played  to  capacity  houses.  In  fact,  the 
matinees,  at  reduced  prices,  brought  a  higher  aver- 
age monetary  yield  than  the  performances  at  full 
prices. 

The  demand  for  the  $2  seats,  although  generally 
not  unsatisfactory,  was  relatively  rather  limited.  It 
would  seem  that  many  of  the  people  who  can  afford 
to  pay  $2  for  a  seat  at  an  operatic  performance  want 
as  an  equivalent  the  brilliancy  and  stars  of  the  Metro- 
politan Opera. 

During  the  last  season,  from  September  15  to  No- 
vember 20,  the  average  paid  attendance  per  week, 
notwithstanding  the  unpropitious  times,  was  14,400 
persons,  which,  I  am  told,  is  a  greater  number  than  at- 
tended any  other  New  York  theatre  in  the  same  period. 

The  thought  on  which  the  Century  organization 
was  started  was  mainly  of  the  many  thousands  of 
people  who  love  operatic  art  or  who  would  love  it  if 


POPULAR-PRICED     OPERA  395 

they  had  the  chance  to  get  to  know  it,  but  whose 
means  do  not  permit  them  to  pay  the  relatively  high 
prices  which  the  costly  standard  at  the  Metropolitan 
Opera  House  imposes,  of  necessity,  on  that  institu- 
tion. We  wanted  to  afford  to  such  people  an  oppor- 
tunity, within  reach  of  their  means,  to  give  their  souls 
an  airing  once  in  a  while,  just  as  the  various  vacation 
funds  help  working  girls  to  get  to  the  country  in  the 
summer  time. 

We  hoped  to  take  a  step  in  the  direction  of  pro- 
viding a  place  for  popular  musical  enjoyment  differing 
from  the  Bowery  variety,  but  there  was  no  question 
of  trying  to  impose  "uplifting,"  or  "educational"  in- 
fluences upon  a  reluctant,  indifferent  or  scoffing  pub- 
lic. We  believed — and  the  experience  of  the  past  two 
seasons  has  demonstrated  our  belief  to  be  well  founded 
— that  there  were  a  great  many  persons  who  would 
eagerly  welcome  the  opportunity  to  hear  the  master- 
pieces of  operatic  art,  at  prices  within  their  reach,  and 
who  would  derive  from  it  satisfaction,  joy  and  in- 
spiration. And  we  felt  that  opera — or,  indeed,  any 
form  of  art — should  not  be  regarded  and  treated  as 
a  luxury. 

Our  thought  was  also  of  the  many  talented  young 
artists,  who,  owing  to  the  extremely  restricted  number 
of  operatic  organizations  in  the  United  States,  have 
far  too  little  opportunity  to  make  their  careers  in 
their  own  country.  We  hoped  that  if  the  Century 
Opera  proved  a  success,  similar  organizations  might 
be  created  in  other  large  cities. 

It  is  a  regrettable  fact  that  under  the  circumstances 


39^  CONCERNING    ART 

as  they  now  are,  the  majority  of  young  American  oper- 
atic artists  are  almost  compelled,  after  their  years  of 
study  are  completed,  to  go  to  Europe  in  order  to  seek 
an  engagement  at  one  of  the  many  smaller  opera 
houses  there,  so  as  to  get  actual  stage  experience  and 
a  repertoire.  From  a  variety  of  causes,  they  have 
but  little  chance  to  acquire  these  essentials  in  their 
own  country.  We  have  only  two  permanent  Grand 
Opera  companies,  and  these  are  under  the  necessity 
of  giving  seven  or  eight  performances  each  week  and 
to  produce  a  different  opera  each  evening  of  the  week, 
which  makes  it  a  practical  impossibility  for  the  con- 
ductors and  stage  directors  to  find  the  time  for  train- 
ing and  rehearsing  beginners.  Moreover,  our  Metro- 
politan Grand  Opera  audiences  demand  finished  art- 
ists. It  is  a  great  pity  that  we  have  no  permanent 
opera  companies  as  yet  in  cities  throughout  the  coun- 
try to  which  our  many  talented  young  artists  could 
go  in  the  beginning  of  their  careers  to  acquire  the  nec- 
essary experience,  routine,  and  repertoire. 

If  we  had  a  number  of  such  companies  in  different 
cities  with  a  keen  and  healthy  rivalry  between  them,  I 
am  confident  that  they  could  easily  find  a  plentiful 
supply  of  excellent  artistic  material  and  the  result 
for  American  musical  art  and  artists,  as  well  as  for 
the  communal  life  and  interest  of  the  respective  cities 
and  states,  would  be  of  very  great  value. 

The  composition  and  attitude  of  the  audiences  at 
the  Century  have  a  real  significance.  They  were  in 
the  main   composed,   as   far  as   we  could  judge,   of 


POPULAR-PRICED     OPERA  397 

American  born.  Those  of  Italian  or  other  foreign 
origin  who  form  so  large  an  element  of  the  Metro- 
politan Opera  public  were  notably  absent.  Many  of 
the  patrons  of  the  Century  had  never  been  to  the 
opera  before.  It  was  to  them  a  new  world.  They 
were  enthusiastic,  serious,  sincere,  intent  on  learn- 
ing. They  stayed  invariably  from  the  first  to  the 
last  note. 

The  galleries  and  dress  circle  would,  I  think,  almost 
have  mobbed  any  one  who  disturbed  them  by  at- 
tempting to  leave  before  the  fall  of  the  curtain,  as  is, 
unfortunately,  done  so  frequently  and  inconsiderately 
at  the  Metropolitan.  It  is  interesting  to  ncte,  as  in- 
dicating the  different  composition  of  the  respective 
audiences,  that  the  attendance  in  the  cheaper  seats 
at  the  Metropolitan  was  in  no  way  diminished,  as 
compared  to  previous  seasons,  during  the  months  when 
the  Metropolitan  and  the  Century  played  at  the  same 
time. 

Generally  speaking,  we  found  that  the  Century 
audiences,  though  very  largely  recruited  from  dif- 
ferent strata  than  the  Metropolitan  Opera  audiences, 
have  the  same  tastes.  The  operas  that  are  favorites 
in  one  place  are  equally  the  most  popular  in  the  other. 
As  for  novelties,  the  public  at  large  do  not  seem  par- 
ticularly eager  to  hear  them — qua  novelties — either 
at  the  Century  or  at  the  Metropolitan,  whether  they 
be  by  American  or  foreign  composers.  They  want 
to  be  reasonably  sure  when  they  go  to  the  opera  that 
they  will  get  their  money's  worth,  and  they  would 
rather  meet  old  and  well-tested  friends  than  spend  an 


398  CONCERNING    ART 

operatic  evening  with  new  and  possibly  undesirable 
acquaintances.  However,  we  had  planned,  if  the  or- 
ganization established  itself  permanently,  to  produce 
several  operas  by  American  composers  each  season. 

The  opera  and  the  theatre  operate  on  different  con- 
cepts. A  play  (aside  from  the  few  very  great  ones) 
that  is  ten  years  old,  creaks  when  you  put  it  on  the 
boards  again  and  bid  it  move.  The  work  of  the  play- 
wright, owing  to  a  variety  of  causes,  has  come  more 
and  more  to  be  of  a  largely  ephemeral  character.  It 
must  be  in  tune  with  the  nerves,  the  feelings,  tastes, 
conceptions  and  sympathies  of  its  own  day.  Not  so 
with  operas.  Provided  they  have  genuine  musical 
merit,  their  effects  are  largely,  though  of  course  not 
entirely,  independent  of  the  changing  generations.  If 
we  leave  aside  the  interests  and  effect  of  novelty,  we 
can  get  pretty  much  the  same  enjoyment  out  of 
Gluck's  "Orfeo"  and  Weber's  "Euryanthe"  to-day  as 
they  conveyed  when  the  composers  wrote  them,  one 
about  a  century  and  a  half  ago,  and  the  other  nearly 
a  century  ago,  not  to  mention  the  fifty-year-old  operas 
of  Wagner  and  Verdi,  or  several  of  the  works  of  those 
of  lesser  stature,  such  as  Donizetti  and  Rossini,  or 
the  gay  tunes  of  Offenbach  and  Sullivan. 

The  great  majority  of  the  Century  performances 
in  the  first  year,  and  all  the  performances  in  the  sec- 
ond year  were  sung  in  English.  I  dare  say,  that  ob- 
servation and  experience  during  those  two  seasons  left 
those  of  divergent  views  on  the  subject  of  opera  with 
translated  texts,  pretty  much  where  they  stood  before. 


POPULAR-PRICED     OPERA  399 

It  goes  without  saying  that  every  American  music 
lover  must  be  cordially  sympathetic  toward  opera  by 
American  composers,  i.  e.t  music  originally  set  to  Eng- 
lish words.  We  should  leave  nothing  undone  to  pro- 
vide opportunity  for,  and  give  encouragement  to  the 
American  composer.  But  one  may  be  fully  in  accord 
with  these  sentiments,  as  I  certainly  am,  and  yet  not 
be  an  advocate  of  the  banishment  of  opera  in  foreign 
languages   from  our  operatic  stage. 

Every  opera  loses,  and  is  bound  to  lose,  in  the  pro- 
cess of  even  the  best  translation.  The  accent,  the 
rhythm,  the  syllables,  the  sound  of  the  vowels,  to 
which  the  music  was  originally  fitted,  are  bound  to 
suffer  modifications,  more  or  less,  even  at  the  hands  of 
the  most  conscientious  and  skillful  translator.  How 
would  you  preserve  in  translation,  to  quote  but  one 
instance,  the  effect  of  "Speeres  Spitze"  in  "Goetter- 
daemmerung,"  with  the  fierce  and  sharp  accentuation 
which  the  music  gives  to  the  sound  and  meaning  of 
"Spitze"? 

Under  our  present  system,  we  have  the  best  singers 
throughout  the  world  to  choose  from  and,  wisely, 
employ  foreign  artists  by  the  side  of  the  ever  growing 
contingent  of  American  singers.  What  is  true  of 
translated  texts  is  true  also  in  many  cases  of  "trans- 
lated voices,"  except  as  to  the  Italian  language  which 
is,  of  course,  the  most  universally  and  gratefully  sing- 
able, irrespective  of  the  singer's  nationality.  True, 
the  artists  of  some  races,  such  as  the  Poles  and  many 
Americans,  seem  to  possess  the  faculty  of  adapting 
themselves  to  singing  in  any  language;  but  this  is  by 


400  CONCERNING    ART 

no  means  the  case  with  French  and  Italians  from 
which  nationalities  some  of  the  world's  greatest  sing- 
ers are  recruited  nor  with  the  great  majority  of  Ger- 
mans and  Austrians.  No  doubt,  most  foreign  artists 
could  and  would,  if  need  be,  learn  to  sing  in  English 
after  a  fashion,  but  most  of  them  would  never  be  able 
to  do  their  best  and  produce  the  same  artistic  results 
and  effects  when  singing  in  English  as  when  singing 
in  their  own  tongue  or  in  Italian. 

The  argument  frequently  heard  that  opera  is  sung 
in  the  vernacular  in  France,  Germany  and  Italy  and, 
therefore,  we  here  should  follow  the  same  practice  is 
fallacious.  In  those  countries  they  simply  cannot  af- 
ford the  expense  which  is  necessarily  involved  in  the 
system  prevailing  at  the  Metropolitan  and  Chicago 
Operas  and  at  the  Opera  of  Covent  Garden  in  Lon- 
don, of  giving  operas  in  the  language  in  which  they 
were  written,  as  far  as  possible  (sometimes,  as  in  the 
case  of  Russian  operas,  it  is  not  possible  and  in  those 
cases  I  think  the  performance  should  be  in  the  Eng- 
lish language).  Our  system  betokens  not  inferiority, 
but  superiority.  The  nations  of  the  European  con- 
tinent have  made  a  virtue  of  necessity.  It  is  only  in 
this  country  (besides  London  and,  of  late,  certain 
cities  of  South  America)  that  we  can  afford  the  cost 
of  the  artistic  luxury  of  having  operas  presented  ex- 
actly as  they  were  composed.  To  adopt  the  European 
system  of  translated  opera  at  the  Metropolitan  and 
Chicago  Opera  Houses  would  not  be  progress  but  re- 
trogression. 

Of  course,  it  is  true  that  that  part  of  our  public 


POPULAR-PRICED     OPERA  401 

which  cannot  follow  the  text  sung  in  a  foreign  lan- 
guage— and  naturally  that  is  the  great  majority — 
loses  something  of  the  complete  enjoyment  of  the 
opera;  but  even  assuming  that  the  text  sung  in  Eng° 
lish  would  always  be  understandable,  a  somewhat 
large  assumption,  I  still  believe  that  the  inability  to 
follow  the  words  is  a  lesser  loss  to  the  listener  than 
the  impairment  of  the  art  value  and  effect  of  an  opera 
by  having  the  music  made  to  fit  a  text  for  which  it 
was  not  composed. 

Moreover,  the  English  language,  in  its  very  spirit, 
does  not  lend  itself  to  the  inanities  and  flowery  senti- 
mentalities of  many  operatic  texts. 

However,  it  must  be  recognized  even  by  those  who, 
like  myself,  believe  in  the  superiority  of  operatic  per- 
formances in  the  original  text,  that  much  can  be  said 
in  favor  of  translated  opera  under  certain  circum- 
stances and  conditions  and  that  there  is  a  distinct 
place  and  mission  for  opera  in  the  vernacular  by  the 
side  of  opera  houses  which,  like  the  Metropolitan  and 
Chicago  Opera  Companies,  adhere  to  the  policy  of 
polyglot  opera. 

There  is,  undoubtedly,  a  popular  sentiment  for 
opera  in  English,  and  that  sentiment  is  entitled  to 
serious  consideration  and  rests  upon  a  feeling  which 
demands  and  deserves  sympathy  and  respect.  On 
the  whole,  the  conclusion  seems  justified  that  for  the 
purposes  of  a  popular  institution,  opera  in  the  ver- 
nacular is  better  adapted  than  opera  in  English.  A 
postal  card  canvass  was  made  among  the  patrons  of 


402  CONCERNING    ART 

the  Century  Opera,  and  a  decisive  majority  of  those 
who  sent  replies  favored  opera  in  English.  That 
will  doubtless  be  again  the  prevailing  view  and  the 
policy  to  be  adopted  if  and  when  the  Century  Opera 
scheme  is  revived.  And  when,  as  I  hope  and  believe 
will  be  the  case  in  the  not  too  distant  future,  we  shall 
have  permanent  opera  organizations  in  cities  other 
than  our  metropolitan  centres,  opera  in  English  will 
be  the  appropriate  and  desirable  medium,  if  only  be- 
cause such  organizations  ought  to  be  training  and 
testing  grounds  for  American  artists  and  neither  ought 
to  engage  foreign  artists  nor  will  be  able  to  afford 
the  expense  of  doing  so. 


There  has  been  some  discussion  recently  as  to 
whether  it  is  advantageous  to  have  a  board  of  amateur 
directors  in  connection  with  an  organization  such  as 
the  Century  Opera  Company.  My  personal  view  is 
that  in  several  respects  a  background  of  amateurs  is 
desirable  and  useful  to  the  atmosphere  of  an  artistic 
venture  of  this  nature.  I  say  advisedly  "a  back- 
ground," because  that  is  where  the  amateur  belongs. 
The  foreground  must  be  exclusively  for  the  manager 
and  his  profesional  staff  and  the  artists.  The  ama- 
teur director  may,  and  should,  advise  and  suggest  and 
criticize;  he  may  in  a  way  be  the  connecting  link  be- 
tween the  public  and  the  manager,  but  he  must  never 
come  between  the  manager  and  the  artists;  or  attempt 
to  exercise  individual  influence  in  the  matter  of  en- 
gagements.    In  short,  he  must  not  interfere  in  the  ex- 


POPULAR-PRICED     OPERA  403 

ecutive  conduct  of  affairs.  Even  the  Board  of  Di- 
rectors collectively  must  be  exceedingly  chary  of  do- 
ing that.  If  the  manager  proves  not  to  be  the  right 
man,  he  should  be  displaced,  but  as  long  as  he  is  in 
charge  he  must  be  left  unhampered  unless  there  be 
really  grave  cause  for  intervention  by  the  Board.  Any 
other  course  spells  disorganization,  wire-pulling  and 
the  destruction  of  essential  discipline. 

A  board  of  amateurs  may  lay  down  the  general 
lines  of  artistic  policy  and  purpose  to  be  aimed  at. 
It  may  supply  idealism  and  enthusiasm,  (but  in  doing 
so,  should  beware  of  that  too  frequent  companion 
thereof,  well-meaning  ignorance).  It  should  seek  to 
be  the  impulse  toward  the  attainment  of  an  ever 
higher  artistic  standard,  never  resting  content  on  the 
laurels  of  what  has  been  attained,  even  if  the  manager 
and  the  public  are  quite  satisfied  with  things  as  they 
are.  It  must  uncompromisingly  resist  the  creeping 
in  of  commercialism  of  any  kind,  holding  it  disgrace- 
ful to  use  money  made  by  an  institution  dedicated  to 
the  promotion  of  art,  for  any  but  an  artistic  purpose. 

The  raison  d'etre  of  the  amateur  board  member  in 
art  is  to  enable  things  to  be  accomplished  which  are 
inherently  worth  while,  but  which,  without  its  sup- 
port, would  not  be  commercially  possible  or  might 
not  be  striven  for.  But  he  must  be  careful  in  the 
selection  of  the  things  which  he  supports.  He  must 
be  honest  with  himself  in  examining  the  motives  why 
he  supports  them,  and  he  must  not  think  that  his  sup- 
port gives  him  the  right  to  become   a   "butting-in" 


404  CONCERNING    ART 

nuisance  or  the  dispenser  of  favors.  In  short,  he  must 
expect  no  return  except  the  satisfaction  of  serving  and 
promoting  a  cause  which  he  believes  in. 


The  idea  of  using  the  Century  Theatre  as  the  home 
of  opera  at  popular  prices  had  long  been  in  the  minds 
of  some  of  my  colleagues  on  the  Board  of  the  Metro- 
politan Opera  and  myself.  When,  with  the  co-opera- 
tion and  upon  the  public-spirited  initiative  of  the  City 
Club,  we  carried  this  idea  into  effect,  it  was  not  a 
move  of  strategy,  of  defense  or  defiance — as  was  and 
probably  still  is  believed  by  some  uncharitably  dis- 
posed diagnosticians  of  motives — but  solely  an  at- 
tempt, influenced  by  no  extraneous  considerations,  to 
serve  a  worthy  cause.  It  was  in  the  spirit  of  bring- 
ing the  joy  and  solace  derivable  from  art  closer  to 
the  masses  of  the  people,  nearer  to  their  reach  and 
their  means,  that  we  undertook  this  venture,  and  in 
the  hope  that  we  might  be  able  to  add  something  of 
value,  however  modest,  to  the  civic  assets  of  New 
York. 

The  fact  that,  faced  with  utterly  abnormal  condi- 
tions, the  Century  Opera  experiment  had  to  be  sus- 
pended for  the  time  being,  gives  no  ground  for  dis- 
couragement. On  the  contrary,  the  public  interest 
and  patronage  with  which  the  performances  have  met 
even  under  these  wholly  adverse  circumstances,  fully 
warrants  the  conclusion  that  opera  at  popular  prices 
answers  to  a  real  demand  in  this  city  and  is  welcome 
by  many  thousands  of  our  people.     I  hope  and  be- 


POPULAR-PRICED     OPERA  405 

lieve  that,  either  through  the  Century  Company  or 
some  other  organization,  the  venture  will  be  resumed 
before  very  long  and  will  develop  into  a  permanent 
institution. 


ART  AND  THE  PEOPLE 


i 


N  giving  you  greeting  and  bidding  you  welcome, 
may  I  say  that  it  is  a  particular  gratification  to 
me  to  see  amongst  you  so  many  whom  I  had  not 
known  hitherto,  or  had  only  known  by  reputation  or 
by  sight.  I  trust  my  old  friends  will  not  consider 
this  a  left-handed  compliment.  I  am  happy  indeed 
to  see  them  here.  But  the  opportunity  to  make  new 
friends,  to  rub  shoulders  and  exchange  thoughts  with 
people  outside  of  one's  accustomed  circle,  is  all  too 
rare  in  this  huge,  rushing  city. 

It  is  one  of  the  greatest  drawbacks  of  life  in  New 
York,  that  the  people  in  the  various  walks  of  life  do 
not  sufficiently  come  in  contact  with  each  other. 

We  New  Yorkers  do  not  mix  enough.  We  men 
and  women  of  different  occupations,  professions  and 
viewpoints  ought  to  meet  far  more  frequently,  we 
ought  to  know  one  another  far  better,  and  thus  demon- 
strate to  one  another  that  none  of  us,  neither  Wall 
Street  men  nor  Socialists,  have  claws  or  hoofs;  that 
we  are  all  made  of  the  same  basic  stuff,  affected  by 
the  same  joys  and  sorrows  and  responsive  to  much 
the  same  appeal. 


At  the  Shakespeare  Tercentenary  Dinner,  New  York,  May  4,  1916. 

406 


ART     AND     THE      PEOPLE  407 

We  ought  to  seek  and  emphasize,  far  more  than  we 
are  doing,  that  which  unites  us  instead  of  searching 
out  and  accentuating  and  indeed  exaggerating  that 
which  separates  us. 

Among  the  common  meeting  grounds  available,  one 
of  the  most  appropriate  is  that  of  art.  For  art  is 
democracy  in  its  very  essence;  not  the  counterfeit 
which,  misunderstanding  or  misinterpreting  the  pur- 
pose and  meaning  of  the  democratic  conception,  seeks 
or  tends  to  establish  a  common  level  of  mediocrity 
and  ultimately  becomes  the  negation  of  liberty,  but 
the  true  democracy  which,  guided  by  the  star  of  the 
ideal,  yet  keeping  its  feet  firmly  on  the  earth  and 
wisely  conscious  of  the  disparities  inherent  in  human 
nature,  strives  to  lead  us  all  onward  and  upward  to 
an  ever  higher  plane. 

And  the  people  are  willing  to  be  so  led.  Let  me 
say  in  parenthesis  that  when  I  say  "the  people,"  I  do 
not  use  the  term  with  the  somewhat  patronizing  in- 
flection that  is  sometimes  imparted  to  it,  rather  imply- 
ing that  the  speaker  refers  to  a  thing  apart  from  him- 
self. I  refer  to  you  and  to  me  no  less  than  to  the 
butcher  and  baker  and  candlestick  maker. 

It  is  a  constant  source  of  wonderment  to  me  how 
"the  people"  are  underestimated  by  most  of  those 
who  seek  their  votes  or  their  patronage.  Just  as  the 
average  politician  thinks  that  "the  people"  want  to 
be  coddled  and  flattered  and  "soft-soaped,"  when  ex- 
perience has  shown  that  the  royal  road  to  popular 
success  is  to  show  courage  and  independence  and  to 
stand  up  man-fashion   for  one's  convictions,   so  the 


408  CONCERNING     ART 

average  theatrical  manager  thinks  that  he  must  play 
down  to  an  assumed  level  of  shallowness,  when  ex- 
perience has  shown  that  the  greatest  probability  of 
scoring  a  hit  is  in  aiming  high. 

I  have  an  abiding  faith  that  the  people  collectively 
know  a  good  thing  when  they  see  it.  It  is  true  that 
sometimes  they  make  the  judicious  grieve  by  taking 
a  pretty  poor  thing  for  a  good  thing,  but  I  have  never 
known  them  to  fail  to  recognize  and  appreciate  the 
truly  meritorious  in  art.  In  fact,  I  have  admiringly 
wondered  more  than  once  at  their  capacity  to  enjoy 
and  digest  heavy  and  unusual  artistic  food,  free  from 
the  salt  or  spice  of  what  is  ordinarily  considered  pop- 
ular appeal. 

I  have  never  believed  in  the  necessity  or  advantage 
of  gauging  theatrical  offerings  according  to  the  alleged 
standards  and  requirements  of  the  "tired  business 
man,"  or,  for  the  matter  of  that,  woman  (for  women 
are  usually  just  as  busy,  and  just  as  tired  after  the 
day's  work  as  are  the  men,  only  as  a  rule  they  carry 
their  tiredness  off  better  and  make  less  fuss  about  it). 
Silly,  inane  shows  are  no  antidote  to  "that  tired  feel- 
ing." What  both  men  and  women,  tired  or  idle,  do 
want  is  to  be  genuinely  moved  and  stirred,  either  to 
laughter  or  to  tears,  or  stimulated  to  new  thought;  in 
short,  to  be  lifted  out  of  the  rut  and  routine  of  their 
daily  lives  and  mental  atmosphere. 

The  conditions  of  existence  of  the  great  majority 
of  the  people  are,  unfortunately,  hard  and  wearing, 
but  I  venture  to  question  whether  as  yet  we  use  sufR- 


ART     AND     THE      PEOPLE  409 

ciently  the  spiritual  means  at  hand  and  well  tested 
in  European  countries,  to  make  them  less  so. 

We  are  doing  as  much,  probably,  for  education  as 
any  other  country,  but  relatively  little  for  recreation. 
And  recreation  of  the  right  kind  does  have  power  lit- 
erally to  re-create,  to  re-create  the  wasting  tissues  of 
our  souls,  the  worn  fibres  of  our  brains,  to  re-create 
indeed  the  zest  and  courage  for  life. 

Art  has  that  power  beyond  all  other  forms  or  means 
of  recreation.  And  the  people  are  ready  to  welcome 
art;  they  are  hungry  for  nourishment  for  their  souls, 
eager  for  outlets  for  their  emotions.  Observation  and 
experience  have  thoroughly  convinced  me  how  great 
and  beneficent  an  influence  art  can,  and  should,  be 
made  in  their  lives. 

II 

Art,  and,  because  of  its  wide  appeal,  particularly 
the  art  of  music  and  of  the  stage,  is  a  serious  and  im- 
portant cultural  element  in  the  life  of  a  community. 
It  has  a  weighty  purpose  and  a  great  mission.  It  is 
one  of  the  most  potent  factors  for  good,  one  of  the 
three  or  four  strongest  agencies  which  tend  to  form 
and  guide  the  thoughts  and  the  sentiments  and  the 
conduct  of  the  people. 

The  craving  for  sensations — so  characteristic  of  our 
time,  and  particularly  of  our  country — some  of  the 
restlessness,  of  the  turmoil,  of  the  lawlessness,  even 
of  the  crime  of  the  day,  spring  in  many  instances 
simply  from  a  desire  to  get  away  from  the  unrelieved 
dullness  and  drudgery  of  every-day  existence. 


4-10  CONCERNINGART 

It  is  very  far  from  being  generally  appreciated  as 
yet,  how  much  can  be  done  by  art,  and  especially  by 
the  art  of  the  stage,  to  give  proper  satisfaction  to  this 
natural  and  legitimate  desire,  to  lead  the  strong  in- 
stinct underlying  it  into  fruitful,  instead  of  into  harm- 
ful, or  even  destructive  expression.  It  is  very  far 
from  being  appreciated  as  yet  by  our  wealthy  men 
that  art  can  be  as  educational  as  universities,  that  it 
is,  or  can  be  made,  a  strong  element  for  civic  better- 
ment, that  it  has  power  of  exhorting  and  stimulating 
and  revealing,  of  soothing  and  healing. 

European  governments  and  municipalities  have  long 
since  recognized  this  aspect  of  public  usefulness  and 
value  inherent  in  art,  and  have  given  expression  to 
this  recognition  by  subsidizing  theatres  and  operas  and 
other  art  institutions.  Here,  in  accordance  with  the 
spirit  and  traditions  of  the  country,  this  task  to  the 
largest  extent  is  left  to  private  initiative,  to  the  gen- 
erosity and  public  spirit,  or,  if  you  will,  the  enlight- 
ened selfishness  of  those  who  can  afford  to  give.  It  is 
a  duty  and  a  privilege  and  ought  to  be  a  pleasure  to 
fulfil   it. 

Those  of  us  who  have  been  favored  by  fortune,  who 
sit  in  our  offices  or  well  appointed  homes  more  or  less 
satisfied  with  the  general  scheme  of  things  and  with 
our  place  in  it,  must  increasingly  do  all  we  can  to 
prove  that  we  are  duly  conscious  of  the  obligations 
which  a  decent  recognition  of  the  advantages  we  enjoy 
imposes  upon  us. 

For  educational  and  scientific  purposes  a  vast  deal 
has  been  done.     The  generosity  displayed  by  many 


ART     AND     THE      PEOPLE  4H 

of  our  wealthy  men  in  this  respect  is  the  envy  and  ad- 
miration of  the  world.  But  to  the  immensely  large 
and  immensely  important  field  of  art  relatively  little 
attention  has  been  given  thus  far.  Yet  the  oppor- 
tunity is  boundless  and  the  need  very  great  for  men 
who  will  put  some  of  their  wealth,  their  time  and 
their  ability  in  the  service  of  this  cause;  who,  conscious 
of  the  importance  and  the  far-reaching  influence  of 
art,  will  help  along  in  movements  having  for  their 
purpose  the  advancement  of  art  and  of  art  standards, 
and  the  procuring  of  more  and  better  opportunities  in 
the  field  of  art,  both  to  the  public  and  to  American 
artists. 

Maecenases  are  needed  for  the  dramatic  stage,  the 
operatic  stage,  the  concert  stage;  for  conservatories 
and  art  academies;  for  the  encouragement  and  sup- 
port of  American  writers,  painters,  sculptors,  deco- 
rators, etc.,  in  fact,  for  all  those  things  which  in 
Europe  have  been  done  and  are  being  done  by  princes, 
governments  and  communities. 

Here  is  a  vast  opportunity  for  cultural  and  helpful 
work.  To  strive  toward  fostering  the  art  life  of  the 
country;  toward  counteracting  harsh  materialism;  to- 
ward relieving  the  monotony  and  strain  of  the  peo- 
ple's every-day  life  by  helping  to  awaken  in  them  or 
to  foster  the  love  and  the  understanding  of  that  which 
is  beautiful  and  inspiring,  and  aversion  and  contempt 
for  that  which  is  vulgar,  cheap,  and  degrading,  is  a 
humanitarian  effort  eminently  worth  making,  and  of- 
fering, moreover,  every  prospect  of  not  being  attempt- 
ed in  vain. 


412  CONCERNINGART 


III 

We  all,  rich  and  poor  alike,  need  to  be  taken  out 
of  the  routine  and  grind  of  our  daily  lives  once  in  a 
while.  We  all  are  the  better  for  psychic  change  from 
time  to  time,  just  as  we  are  the  better  for  physical 
change  of  air  and  surroundings.  A  sluggish  soul  needs 
stimulation  just  as  much  as  a  sluggish  liver.  We  need 
to  exercise  the  muscles  of  our  soul  just  as  we  need  to 
exercise  those  of  our  body. 

To  feel,  to  appreciate,  to  understand  the  beauty 
of  nature  and  of  art  is  one  of  the  greatest  gifts  that 
can  be  given  to  any  one  on  his  way  through  life.  I 
think  a  great  majority  of  us  find  it,  with  other  gifts, 
in  our  cradle,  but  too  many  of  us  either  do  not  grasp 
it,  or,  as  we  grow  up  and  face  the  serious  business  of 
life,  deliberately  throw  it  overboard,  looking  upon  it 
as  useless,  or  even  harmful  ballast  in  the  stern  and 
strenuous  struggle  for  success.  This  is  a  pity  and  a 
great  mistake,  even  from  a  utilitarian  point  of  view. 
Just  as  the  soil  of  agricultural  land  requires  rotation 
of  crops  in  order  to  produce  the  best  results,  so  does 
the  soil  of  our  inner  being  require  variety  of  treatment 
in  order  to  remain  vigorous  and  elastic  and  fertile  and 
to  enable  us  to  produce  the  best  of  which  we  are 
capable. 

Wealth  is  only  in  part  a  matter  of  dollars  and  cents. 
The  visitor  who  pays  twenty-five  cents  for  a  seat  at  a 
popular  concert,  if  he  brings  with  him  love  and  enthu- 
siasm for  art,  will  be  far  richer  that  evening  than  the 


ART     AND     THE      PEOPLE  413 

man  or  woman  from  Fifth  Avenue  if  he  or  she  sits 
yawning  in  a  box  at  the  Metropolitan  Opera  House. 
The  poor  man  in  a  crowded  tenement  who  feels  moved 
and  stirred  in  reading  a  fine  book  will  be  far  richer  than 
the  man  or  woman  sitting  in  dullness  in  a  gorgeous  li- 
brary. If  he  goes  to  Central  Park  or  Riverside  Drive 
with  his  eyes  and  soul  open  to  the  beauties  of  nature, 
he  will  be  far  richer  than  the  man  or  woman  chasing 
through  the  glories  of  Italy  or  France  in  a  luxurious 
automobile,  the  man  thinking  of  the  Stock  Exchange 
and  the  woman  of  her  new  dress  or  next  party. 

I  don't  mean  to  imply  that  love  of  art  is  lacking 
among  the  well-to-do  and  is  preponderantly  confined  to 
those  not  blessed  with  worldly  goods.  Feeling  for 
art  has  nothing  to  do  with  the  size  of  a  man's  pocket- 
book.  Proportionately  speaking,  there  is  probably  no 
very  great  difference,  as  to  the  number  of  art  lovers 
on  Fifth  Avenue  and  on  Avenue  A.  But  the  inhabi- 
tants of  Fifth  Avenue  have  a  far  greater  and  more  con- 
tinuous supply  of  diversions,  artistic  and  otherwise, 
than  those  of  Avenue  A,  and  therefore,  are  naturally 
not  as  responsive  and  susceptible  to  the  simpler  appeal, 
do  not  bring  the  same  freshness,  zeal  and  enthusiasm  to 
their  enjoyments,  nor  carry  away  from  them  the  same 
degree  of  stimulation  and  satisfaction.  That  is  one 
of  the  penalties  of  Fifth  Avenue  and  one  of  the  re- 
wards of  Avenue  A. 

IV 

The  late  Booker  T.  Washington  used  to  tell  a  story 
of  his  meeting  a  colored  woman  and  asking:    "Well, 


414  CONCERNINGART 

Miranda,  where  are  you  going'?"  to  which  she  re- 
sponded, "I'se  goin'  nowhere,  Mr.  Washington,  I'se 
been  where  I  am  goin'." 

This  country  hasn't  "been  where  it  is  goin'."  A 
great  stirring  and  moving  is  going  on  in  the  land.  The 
old  order  changeth,  giving  place  to  new.  Call  it  "the 
new  freedom"  or  "my  policies,"  or  what  you  will,  the 
people  at  large  are  astir  groping,  seeking  for  a  condi- 
tion of  things  which  shall  be  better  and  happier,  which 
shall  give  them  a  greater  share,  not  only  of  the  com- 
forts and  material  rewards,  but  of  the  joys  and  the 
recreations,  the  beauties  and  the  inspirations  of  life. 
It  is  a  movement  which  is  full  of  promise,  and  a 
menace  only  if  ignored,  repressed,  or  falsely  and  self- 
ishly led.  Most  of  it  will  find  expression  in  politics, 
in  economic  and  social  legislation;  some  of  it  will  find 
expression  in  art. 

In  this  great  country,  with  its  vast  mixture  of  races, 
all  thrown  into  the  melting  pot  of  American  traditions, 
climate  and  surroundings,  there  is  all  the  raw  material 
of  a  splendid  artistic  development.  Every  kind  of  tal- 
ent is  latent  here.  All  that  is  required  is  opportunity, 
inspiration,  and  guidance.  And  in  addition  we  have 
here  perhaps  the  best  public  to  appeal  to  that  exists 
anywhere,  a  public  eager  to  learn,  quick  to  perceive 
and  to  respond,  sure  to  appreciate  and  retain;  fresh, 
spontaneous,  and  genuine  in  its  feelings,  clean  and 
healthy  in  its  artistic  instincts  and  aspirations,  not  yet 
affected  by  the  taint  of  decadence  which  has  begun  to 
cast  its  blight  upon  art  in  some  other  countries. 

In  saying  this,  I  do  not  dispute  the  charge  frequently 


ART     AND     THE      PEOPLE  415 

laid  against  us  that  our  people  lack  as  yet  in  discrimina- 
tion and  finesse,  and  that  they  are  not  sufficiently 
intolerant  of  the  meretricious  in  art.  But  these  are 
faults  of  youth,  and  moreover  essentially  negative 
faults,  curable  and  in  process  of  being  cured,  while  the 
virtues  to  which  I  have  referred  are  positive  in  charac- 
ter and  cumulative  and  progressive  in  effect.  Admitting 
that  our  people  are  apt  at  times  to  follow  false  gods,  I 
say,  let  the  right  god  come  along  and  they  will  recog- 
nize him  unfailingly  and  follow  him  rejoicing. 

America  is  much  misunderstood  and  consequently 
maligned.  Its  foibles,  its  imperfections  "jump  at  the 
eye,"  to  use  a  graphic  French  expression.  Its  really 
controlling  qualities — and  they  are  beautiful  and  lofty 
and  full  of  promise — lie  deep  and  are  not  apparent  to 
the  casual  beholder.  The  world  likes  the  short  cut  of 
catch  phrases,  such  as  "the  almighty  dollar,"  and  is  re- 
luctant to  go  to  the  trouble  of  reconsidering  opinions 
once  formed. 

America  in  the  past  century  had  the  formidable  task 
of  conquering  a  continent,  physically  and  industrially, 
and  it  was  necessary  that  the  best  brains,  the  intensest 
energies  and  activities  of  its  people  should  devote  them- 
selves to  that  stern  task  of  material  effort,  the  success 
of  which  was  naturally  measured  and  expressed  largely 
in  terms  of  dollars  and  cents. 

But  the  day  of  the  industrial  pioneer  is  over  (though 
vast  material  development,  vast  indeed  beyond  all 
imagination,  still  lies  before  us)  and  with  it  has  gone — 
if  it  ever  existed — the  day  of  the  almighty  dollar.  The 
day  of  the  pioneer  of  culture  and  idealism  has  come, 


4-l6  CONCERNING    ART 

and  the  power  of  the  idea  is,  and  has  always  been, 
even  in  America's  most  materialistic  days,  far  mightier 
than  that  of  the  dollar.  After  more  than  a  century's 
stupendous  effort  and  unparalleled — almost  too  rapid — 
economic  advance,  we  have  reached  a  stage  where  we 
can  afford,  and  ought,  to  occupy  ourselves  increasingly 
with  questions  affecting  the  mental,  moral,  and  psychi- 
cal well-being  and  progress  of  the  race. 


A  vast  army  equipped  with  spiritual  weapons,  second 
to  those  of  no  other  nation,  stands  ready  and  impatient 
to  follow  those  qualified  to  lead,  across  the  tenaciously 
held  trenches  of  ugliness,  dullness  and  commercialism, 
to  the  heights  beyond.  America  has  been  rightly 
called,  by  a  hard-headed  European  observer,  "the  land 
of  unlimited  possibilities."  He  referred  to  the  possi- 
bilities of  business,  but  the  same  thing  holds  true  of 
the  possibilities  of  art.  More  in  this  country  than  any- 
where else,  is  it  possible  to  walk  with  one's  feet  on  the 
earth  and  one's  head  in  the  clouds. 

In  the  present  juncture  of  the  world's  affairs  many  a 
great  opportunity  and  a  duty  commensurately  great  lie 
before  America.  One  of  the  greatest  of  such  opportuni- 
ties and  duties  is  in  the  field  of  art. 

When  this  appalling  war  comes  to  be  ended,  the 
heavy  burden  of  reconstruction  will  lie  upon  weary  and 
weakened  Europe.  Millions  of  the  flower  of  its  youth 
and  manhood  will  have  been  killed  or  maimed.  The 
utmost  energies  of  the  men  and  women  of  the  leading 


ART     AND     THE      PEOPLE  417 

European  nations  will  have  to  be  devoted  for  years  to 
come  to  the  hard  and  stern  task  of  material  effort. 

In  the  stress  and  strain  of  the  post-bellum  period,  the 
high  altar  on  which  burns  the  sacred  flame  of  art,  may 
be  left  for  a  time  with  but  few  attendants.  It  is  Amer- 
ica's opportunity,  it  is  America's  high  privilege  and  duty 
to  aid  in  keeping  alive  that  sacred  flame.  It  is  her  priv- 
ilege and  duty  to  open  wide  her  portals  to  art  and 
artists,  to  become  a  militant  force  in  the  cause  and  serv- 
ice of  art,  to  be  foremost  in  helping  to  create  and  spread 
that  which  beautifies  and  enriches  life,  to  fight  and  seek 
to  destroy  that  which  vulgarizes  and  lowers  it. 

To  accomplish  this  great  task  there  must  be  leaders — 
but  the  test  of  a  leader  is  that  he  have  followers.  Those 
who  conceived  and  took  charge  of  the  execution  of  the 
bold  and  broad  plans  of  the  Shakespeare  Tercentenary 
Celebration  have  met  that  test.  In  the  face  of  much 
discouragement  and  some  scoffing,  they  went  ahead  in 
that  simple  and  enthusiastic  faith  which  has  the  power 
to  move  mountains,  and — that  is  perhaps  no  less  hard 
— to  move  New  York.  They — and  I  mean  especially 
the  women,  for  it  is  the  women  who  did  much  the  larg- 
est and  hardest  part  of  the  work — have  accomplished 
what  has  never  before  been  done  in  this  city :  they  have 
aroused,  mobilized,  and  organized  the  community  spirit 
in  the  cause  of  art. 

This  Tercentenary  Celebration  which  will  culminate 
in  the  production  of  Percy  Mackaye's  Masque,  is  not  a 
"high-brow"  affair,  it  is  not  a  benevolent  uplift  move- 
ment backed  by  a  few  men  and  women  of  wealth.  It 
stands  upon  a  broad  and  deep  popular  base;  it  enlists, 


4-l8  CONCERNINGART 

and  has  significance  for  all  sections  and  callings  of  our 
city.  It  has  the  enthusiastic  support  and  active  co- 
operation of  two  thousand  different  organizations  di- 
rectly representing  800,000  constituents.  It  is  the  most 
democratic,  most  comprehensive,  and  most  promising  re- 
sponse that  ever  has  been  given  in  this  community  to 
the  appeal  of  art.  It  demonstrates  conclusively  the 
extent  and  genuineness  of  the  latent  interest  in,  and 
feeling  and  desire  for  art  among  the  people  of  New 
York. 


VI 

And  now  that  we,  or  rather  the  men  and  women 
workers  of  the  Shakespeare  Celebration  Committee — 
for  my  own  part  has  been  entirely  insignificant — have 
succeeded  beyond  all  anticipations  in  calling  the  com- 
munity spirit  into  action,  let  us  seek  to  perpetuate  it  as 
a  concrete  and  living  force.  The  main  purpose  for 
which  I  have  ventured  to  ask  you  all  to  this  dinner- 
meeting,  was  to  obtain  appropriate  action  to  that  end. 

Hoping  that  you  will  forgive  me  a  somewhat  Tam- 
manyesque  method  of  procedure  for  the  sake  of  the 
good  cause,  and  also  for  the  sake  of  completing  our 
program  for  this  evening  at  not  too  late  an  hour  for 
your  comfort,  I  have  made  free  to  prepare  a  resolution. 
In  keeping  with  the  spirit  and  character  of  this  gather- 
ing, I  have  asked  Mr.  James  M.  Beck,  who,  apart 
from  being  a  distinguished  writer  and  orator  and  a  pro- 
found student  of  Shakespeare,  is  a  corporation  lawyer 
and  a  stalwart  Republican,  to  move  it,  and  Mr.  Morris 


ART     AND     THE      PEOPLE  419 

Hillquit,  a  tribune  of  the  people  and  a  leading  ex- 
ponent of  Socialistic  doctrine,  to  second  it.  The  reso- 
lution is  as  follows: 

Whereas  the  attendance  at  the  various  Shakespeare 
performances  during  the  past  theatrical  season  and  the 
widespread  interest  displayed  in  the  Shakespeare  Ter- 
centenary Celebration  have  demonstrated  that  the  peo- 
ple in  all  walks  of  life  are  ready  to  respond  to  the  ap~ 
peal  of  serious  art,  and 

Whereas  the  Shakespeare  Tercentenary  Celebra* 
tion  Committee  has  succeeded  in  enlisting  the  co-opera- 
tion of  a  great  many  different  organizations  toward 
an  adequate  expression  of  the  community  spirit  in  art, 
and 

Whereas  it  appears  desirable  to  perpetuate  and  en- 
large such  co-operation  and  to  endeavor  to  give  com- 
prehensive expression,  definite  aim,  and  systematic 
guidance  to  what  has  heretofore  been  mainly  indeter- 
minate aspiration  and  sporadic  and  scattered  effort, 

Be  It  Resolved  That  the  Mayor 's  Honorary  Com- 
mittee and  the  New  York  City  Shakespeare  Tercenten- 
ary Celebration  Committee  constitute  themselves  into 
a  permanent  organization,  with  power  to  add  to  their 
number,  in  order  to  serve  the  cause  of  art  and  more  par- 
ticularly that  of  the  stage  and  of  the  pageant,  and  to 
foster  and  give  expression  to  the  community  spirit  and 
to  community  effort  in  art. 

Further  Resolved  That  the  Chairman  be  directed 
to  appoint  a  committee  for  the  purpose  of  devising 
ways  and  means  to  carry  into  effect  the  sense  of  this 
resolution  and  that  such  committee  report  its  reconi- 


420  CONCERNING    ART 

mendations  and  conclusions  to  a  joint  meeting  of  the 
Mayor's  Honorary  Committee  and  the  Shakespeare 
Tercentenary  Celebration  Committee,  such  meeting  to 
be  called  by  the  Chairman  at  as  early  a  date  as  practi- 
cable. 


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